Isuzu is one of the world’s leading manufacturers of commercial vehicles and diesel engines. Always an innovator, Isuzu introduced Japan’s first diesel engine in 1936, and today we are leading the way in developing environmentally friendly diesel tech-nology. We are the market leader in at least one product category in 23 different countries and our products are found in over 130 countries around the world. For example, in Japan we led the mar-ket for 2–3 ton trucks with over 38.4% market share in fiscal 2005, and in the U.S. Isuzu has been the leader in imported class 3 and class 7 low cab forward (LCF) trucks for 19 straight years.

Trucks

Isuzu trucks are trusted around the world for their reliability on

the job and durability even under the most demanding condi-

tions. We are the world’s largest manufacturer of medium-duty

trucks and our lineup of trucks—ranging from the light duty

N series (ELF in Japan) to the heavy duty C&E series (GIGA in

Japan)—is designed to meet the needs of any business. Isuzu

trucks exceed today’s stricter environmental standards, offering

cleaner emissions as well as advanced safety features. Isuzu in-

novations include Japan’s first “4-bag” air suspension and the

Smoother series of transmissions for easy handling and better

fuel economy. Isuzu also offers services such as seminars on

economical operating techniques and consulting on meeting

emissions standards.

Truck LineupHeavy-duty trucks Japan • GIGA series

Overseas • C&E seriesMedium-duty trucks Japan • FORWARD series

Overseas • F seriesLight-duty trucks Japan • ELF series

Overseas • N series

Buses

Our ERGA and ERGA Mio buses are powered by fuel-

efficient, low-emission Isuzu diesel engines, with CNG

power plants available on some models. The highly

rigid body structure of these buses complies with the

Economic Commission for Europe’s (ECE) demanding

R-66 standards for vehicle rollover performance. Like

our trucks, our buses comply with the latest, stringent

emissions regulations.

Bus LineupLarge-capacity buses• ERGA series (route buses)• GALA series (sightseeing buses)Medium-capacity buses• ERGA Mio series (route buses)• GALA Mio series (sightseeing buses)Microbuses• JOURNEY series• COMO series

Pickup Trucks, AUVs and SUVs

Our fifth-generation one-ton pickup truck, the Isuzu D-

MAX developed in collaboration with General Motors,

is the uncontested market leader in Thailand, where

we command 37.8% of the market for one-ton pickup

trucks. We sold 139,753 Isuzu D-MAXs in Thailand in

FY 2005, making it the best-selling vehicle ever in that

country. We also export these trucks to Australia, South

Africa, the Middle East and Europe. Isuzu wound up

its manufacture of SUVs in the U.S. in July 2004, but in

November launched sales of the MU-7 in Thailand.

Pickup Truck, AUV and SUV LineupPickup truck• Isuzu D-MAXAUV (Asian Utility Vehicle)• PANTHERSUVs• ASCENDER• MU-7

Powertrains

Isuzu powertrains have come to symbolize unsurpassed qual-

ity. Diesel engines emit less CO2 than gasoline-powered en-

gines and offer excellent fuel economy. Diesel engines account

for a growing share of the automotive market in Europe, and

through our partnership with General Motors, Isuzu engines are

used in GM pickup and other trucks in the U.S. and Opel, Saab

and Renault automobiles in Europe.

Powertrain LineupAutomotive• 4EE2-TC 1.7-Liter Diesel Engine• 6DE1 3.0-Liter Diesel Engine• 8GF1 6.6-Liter Diesel Engine (Duramax 6600)• 6HK1-TC 7.8-Liter Diesel Engine (Duramax 7800)Industrial• L-Series 3&4 Cyl.s 1.1–2.2 Liter 12–40kW• B-Series 4&6 Cyl.s 4.3–6.5 Liter 45–140kW• H-Series 6 Cyl.s 7.8 Liter 100–200kW• J-Series 4 Cyl.s 2.7–3.1 Liter 20–65kW• S-Series 3&4 Cyl.s 9.8 Liter 130–240kW• W-Series 6 Cyl.s 15.7 Liter 180–350kWMarine• In-line 6 Cylinder Turbo Intercooler series• In-line 4 Cylinder Turbo Intercooler series• Natural Aspiration series

01 02

Isuzu Around the World

100

200

300

400

UK

’03 ’04 ’05

100

200

300

400

Poland

’03 ’04 ’05

S.Africa

’03 ’04 ’05

Thailand

’03 ’04 ’05

Japan

’03 ’04 ’05

China

’03 ’04 ’05

Indonesia

’03 ’04 ’05

USA

’03 ’04 ’05

Others

’03 ’04 ’05

Total Global Production

831,000

969,000

1,117,000

’03

’04

’05

473,000

510,000

579,000

Engines Vehicles

Our Corporate Vision

Isuzu will always mean the best

A leader in transportation, commercial vehicles and diesel engines, supporting our customers and respecting the environment

Our Corporate Mission

Trust, Action, Excellence

A global team delivering inspired products and services committed to exceeding expectations

Our Corporate Statement

Isuzu is moving forward on research and development in

the latest technologies for trucks, buses, pickup trucks and

diesel engines with a focus on cleaner, more environmentally

friendly diesel and hybrid technologies so that we can

offer products and services that satisfy the needs of our

customers around the globe with minimal environmental

impact. For the sake of the future of our planet, we are

working to develop clean diesel engines and promoting

the more widespread acceptance of vehicles that use low-

emission CNG and LPG fuels. We are also

forging ahead on the development of

clean energy vehicles such as ultra-low

PM emissions diesel vehicles, diesel-engine-based hybrid

vehicles, and vehicles that run on dimethyl ether (DME),

an alternative energy fuel. Isuzu is pouring a tremendous

amount of effort into this research and development, and

making a broad

contribution to

society through the

resulting advances in

vehicle technology.

Forward-Looking Statements

This annual report contains forward-looking statements

about Isuzu Motors Limited’s plans, strategies, beliefs and

future performances. These forward-looking statements

are based on current expectations, estimates, forecasts and

projections about the industries in which Isuzu Motors Limited

operates, and management’s beliefs and assumptions. As the

expectations, estimates, forecasts and projections are subject

to a number of risks, uncertainties and assumptions, actual

results may differ materially from those projected. Isuzu urges

readers to exercise due divergence/discretion when making

investment decisions.

I s u z u T e c h n o l o g y

C o n t e n t s

Isuzu Around the World 01

Isuzu Technology 03

Profile 04

Consolidated Financial Highlights 05

Message from the President 06

The Mid-Term Business Plan 08

Isuzu Developments 10

Environmental & Social Responsibilities 12

Corporate Governance 14

Financial Section 15

Five-Year Summary 16

MD&A 17

Consolidated Balance Sheets 20

Consolidated Statements of Operations 22

Consolidated Statements of Shareholders‘ Equity 23

Consolidated Statements of Cash Flows 24

Notes to Consolidated Financial Statements 25

Report of Independent Auditors 36

Corporate Directory 37

Board of Directors 38

Corporate Data 39

03

Profile

Isuzu’s presence as one of the world’s leading truck and diesel engine manufac-turers is highlighted by its outstanding track record in the commercial vehicle mar-ket. Isuzu manufactured 86,354 trucks with gross vehicle weight (GVW) of at least 6.1 tons (14,000 lbs) in Japan in 2003, making the company the world’s number-one manufacturer of medium- and heavy-duty trucks on a single-country comparison. Isuzu’s domestic production volume returned to the top position for the first time in six years. Moreover, in 2004 Isuzu’s ELF gained top market share in Japan and 21 other countries around the world. The secret of its success can be found in its extraordinary reliability, durability, and maneuverability—a product of Isuzu’s fundamental principle of taking on new challenges and pursuing innovation while always placing top prior-ity on product quality—backed up by high quality after-sales service. The ELF features technology that anticipates competition, constantly sets the trend in cab styling and color, and enjoys an enviable reputation for comfort and maneuverability as a result of ongoing improvements from the driver’s point of view. As well, Isuzu’s commitment to meeting customer needs at the same time as being socially responsible is reflected in the concept underlying Isuzu product design and development.

Isuzu strives to be a market leader in its environmental policy as well. The Isuzu Charter on the Global Environment sets out our commitment to environmental pres-ervation by developing eco-friendly vehicles and diesel engines, and environmentally sound manufacturing through reducing waste and use of substances with negative environmental impact, boosting recyclability, and preventing pollution. Our responsi-bility to the environment does not stop after delivery—Isuzu offers an online vehicle diagnostic system whose goal is to lower environmental impact during vehicle opera-tion. Our slogan “For the Future of Mankind and the Earth” sums up our far-reaching commitment to environmental conservation.

04

5

Isuzu Motors Limited Annual Report 2005

Year ended March 31 2005 2004 2003 2005

For the Year:

Net sales

Net income (loss)

At Year End:

Total assets

Shareholders’ equity

CONSOLIDATED FINANCIAL HIGHLIGHTS

Millions of yenThousands ofU.S. dollars

-150,000

-100,000

Mar/01 02 03 04 05

-50,000

0

50,000

FY

0

500,000

Mar/01FY 02 03 04 05

1,000,000

1,500,000

2,000,000

Note: U.S. dollar figures have been calculated at the rate of ¥107.39=U.S.$1, the approximate rate of exchange prevailing on the Tokyo Foreign Exchange

Market on March 31, 2005.

Net Sales(Millions of Yen)

Net Income (Loss)(Millions of Yen)

Total Assets(Millions of Yen)

2005 2004 2003 2005

Per Share:

Net income (loss) – primary

Yen U.S. dollars

$13,907,883

559,058

$10,639,544

1,475,591

¥1,349,449

(144,301)

¥1,028,844

26,434

¥1,430,339

54,713

¥1,077,816

109,753

¥1,493,567

60,037

¥ 1,142,580

158,463

$0.53(¥131.34)¥72.37¥56.64

0

500,000

Mar/01FY 02 03 04 05

1,000,000

1,500,000

2,000,000

05

Yoshinori IdaPresident & Representative Director

Message fromthe President

Fiscal 2005 (ended March 31, 2005) was a pivotal year for Isuzu, being the final year of our New Three-Year Business Plan when we expected programs to be well on track and see evidence that our earnings structure had improved. We overcame challenging business conditions and posted record profits at all levels, with overseas sales and subsidiaries compensating for lower parent earnings.

06

increase in steel and crude oil prices, but these challenges are to be expected when running a business. Having established a busi-ness structure able to remain profitable regardless of some insta-bility in the business environment as a result of the New Three-Year Business Plan, I am confident that we can overcome adversity through effort and creative management.

Our Future Vision outlined in the Isuzu Mid-term Business Plan is to become a leading global company in the commercial vehicle and diesel engine (CV/DE) markets. The definition of “leading global company” is likely to vary between business units—we may be re-ferring to volume, technology, or profit margins. We strive to be the No. 1 CV/DE company with three No. 1 technologies—safety (superb product reliability), economy (excellent product life-cycle cost), and environmental technology based on our super-clean die-sel engines.

Numerical targets for the Isuzu Mid-term Business Plan are con-solidated-basis sales of ¥1,600,000 million and operating profit of ¥100,000 million. We also plan to expand CV sales volume overseas from the current 150,000 vehicles per year to 300,000 vehicles per year in the fiscal year ended March 2008. During the same period we aim to increase our share of the domestic CV mar-ket from 26% to 30% in the heavy-duty segment and from 36% to 40% in the 2–3t class, and raise our annual ASEAN LCV produc-tion volume from 200,000 units to 300,000 units. It is up to each business unit to formulate an action plan to make continual prog-ress toward these goals.

After a period of cutting back on investment, we will be invest-ing more in R&D and sales. We have started investing in a major development program to integrate light-duty and medium-duty trucks and effect a full model change. On the sales front, we plan to invest in reorganization of overseas distributor networks and strengthening domestic sales channels. Since these investment pro-grams have the potential impact of transforming Isuzu’s business structure, we should always be aware of why we are investing. Aggressive investment can only weigh on earnings without careful consideration of the role technology and facilities play, and striking a balance between domestic and overseas operations.

In the longer term, we are focusing on building a solid business structure consisting of four core businesses—the CV business in Japan and overseas, and the light commercial vehicle (LCV) and DE business—and ensuring sustainable growth. We look to establish the CV business in Japan as a stable earnings base by capturing and maintaining top market share, and grow the overseas CV busi-ness by securing a sound volume base. We plan to strengthen the LCV business globally so it develops into a significant profit base, and develop the DE business as a new mainstay in terms of rev-enue and profit.

As we start the first year of a new three-year business plan, we look forward to your continued support as we embark on our mis-sion to become a global leader in the commercial vehicle business.

June 2005

Yoshinori Ida, Yoshinori IdaPresident & Representative Director

Despite growing pressure on the operating environment from a reactionary downturn in domestic demand, rising raw materi-als prices, and increased R&D expenses, we posted record profit at all levels on 4% sales growth in fiscal 2005 (ended March 31, 2005). Consolidated-basis sales grew 4.4% from a year earlier to ¥1,493,567 million, operating income was up 3.2% to ¥87,214million, working profit rose 12.1% to ¥91,555 million, and net in-come grew 9.7% to ¥60,037 million. Since these results indicate that we succeeded through the New Three-Year Business Plan in restructuring our business base into a highly profitable one, we decided to resume dividends for the first time in seven terms.

Fiscal 2006 (ended March 31, 2006) is the critical first year of our next three-year business plan—the Isuzu Mid-term Business Plan (April 2005–March 2008) that we announced in November 2004. We anticipate flat domestic demand in the first half, but an increase in the second half as demand grows in the Tokyo, Nagoya, Osaka and Hyogo areas for low-NOx/low-PM vehicles that comply with the NOx/PM law. We anticipate a temporary increase in expenses to finance aggressive R&D and capital investment on top of projected continued increases in prices of raw materi-als such as steel and rubber, but nonetheless expect to achieve and surpass our earnings targets and build foundations for future growth by absorbing the increase in spending with domestic and overseas sales growth and streamlining efforts.

Our balance sheet still leaves some scope for improvement. Some say that we have completed our restructuring program by repurchasing some preferred stock and paying a dividend, but there is still much more to do. We have reduced borrowings (ex-cluding convertible bonds) to below ¥400,000 million, and contin-ue to decrease interest-bearing debt, working toward our target DER of 1.0 as well as increasing equity capital beyond the current level of around ¥160,000 million. It is also important for us not only to pay dividends, but to do so in a way that makes sense to our investors.

The next three years promise to be a challenge financially, and much depends on finding and maintaining the right balance of management resources. We intend to continue our efforts to strike the right balance in distributing our net income in the form of divi-dends, R&D and capital investment at the same time as keeping our finances on an even keel, thereby enhancing corporate value and strengthening our competitiveness to bring us a step closer to our goal of becoming the world’s leading CV/DE company.

We also went ahead with organizational reform prior to the start of the new Isuzu Mid-term Business Plan. The three main ob-jectives are to rejuvenate the organization on completion of a ma-jor phase of our business restructuring program, actively welcome personnel from outside the company so we can make progress with expanding our overseas business under the Isuzu Mid-term Business Plan, and streamline the management structure by reduc-ing the number of business units from 83 to 75.

The Isuzu Mid-term Business Plan (April 2005–March 2008) starting in fiscal 2006 is positioned as three years of aggressive in-vestment to lay the foundations for sustained business growth in the coming years. Fiscal 2006 is the all-important first year of the plan, when we need to proceed with caution to avoid unnecessary mistakes.

Our goal for fiscal 2006 is to maintain our earnings momentum and post record profit for the third consecutive term. Operating conditions began turning against us in fiscal 2005, such as a sharp

Isuzu Motors Limited Annual Report 2005

07

The Mid-Term Business Plan

On November 18, 2004, Isuzu announced a new Mid-term Business Plan covering three finan-cial years from April 2005 to March 2008. Setting out to operate under a new corporate vision— “the world-leading global CV/DE company,” Isuzu looks to expand its commercial vehicle and diesel engine business on a global basis. Earnings targets for the Plan are consolidated operating profit of ¥100 billion on consolidated sales of ¥1,600 billion in the financial year ending in March 2008.

08

The Mid-term Business Plan calls for aggressive invest-ment by the company as a strategic stepping stone to fu-ture growth. We aim to establish a solid business base by enhancing the product line with the development of global, strategic products, reinforcing organizational capabilities and strengths in each business sector by product and mar-ket, and strengthening collaboration with General Motors Corporation.

More specifically, the plan targets 20% product cost re-duction through modularization, component integration, and introduction of new products, selling strategic trucks to capture the No. 1 position in Japan, strengthening world-wide commercial vehicle distribution capability to achieve annual overseas commercial vehicle sales of 300,000 units by March 2008, and maximizing profit by integration of the light-duty commercial vehicle (LCV) platform and the in-troduction of derivative models. In addition, Isuzu plans to extend its role as a key player in the General Motors Group through joint development and manufacturing and actively strengthening the collaborative relationship with GM.

With these key themes, Isuzu will strive to grow its cor-porate value and fortify its basic strengths with the goal of consolidating its competitive advantage.

The Mid-term Business PlanThe Mid-term Business Plan includes the following two main elements:

Develop and introduce strategic products for global markets Develop strategic products. Reinforce cost structures. Strengthen collaboration with GM.

Reinforce business operations by product/market Strengthen the CV business in Japan. Realign and reinforce the CV sales organization in overseas markets. Maximize LCV operating income. Expand and sustain growth of the DE business.

Develop and introduce strategic products for global markets

Plans to develop strategic products include the “Asian Truck” in the heavy-duty segment targeted at the Chinese and ASEAN markets, integrated products in the medium and light-duty segments like the F-series and N-series trucks that meet global market requirements, integrating the pick-up truck platform to enjoy volume benefits by global de-ployment, and a step-by-step program to convert the DE range into super-clean diesel engines.

Taking advantage of the opportunities presented by new product releases, Isuzu plans an extensive review of devel-opment concepts and processes to maximize production efficiency and reduce product cost by 20%.

Isuzu Motors Limited Annual Report 2005

Isuzu is also committed to strengthening collaboration with General Motors. As a key player of the GM group, Isuzu has started strategic studies with GM with a view to expand-ing Isuzu’s role in joint product development and manufac-turing. This includes expanding Isuzu’s CV business and use of Isuzu DE within the GM Group and joint development of next-generation LCV models for the global market.

Reinforce business operations by product/marketIsuzu is eager to reinforce the CV business in Japan. In our

bid for the top spot in the Japanese CV market, we plan to introduce new strategic products including a new engine with superb fuel economy for the GIGA heavy-duty truck, and new medium and light-duty truck models built on integrat-ed modules. Isuzu aims to capture 30% of the heavy-duty truck market and 40% of the light-duty truck market with renewed marketing efforts in weaker segments and regions.

Realigning and reinforcing the CV sales organization in overseas markets requires restructuring the distribution func-tion to establish sales capability of 300,000 units per year in overseas CV markets by the end of the year to March 2008. In the ASEAN region, we plan to realign the distribu-tion business in Indonesia—a key market for Isuzu—and strengthen service and after-market functions. We plan to expand sales channels and after-sales networks in China, while enhancing collaborative relationships with partner companies. Isuzu intends to extend the CV product range in North America by leveraging its leading position in the LCF market and strong brand equity. Elsewhere Isuzu plans to invest in sales operations in stages, entering aggressively into local sales businesses and partnerships in key markets and moving quickly into untapped markets to develop future profit opportunities.

Maximizing LCV operating income entails integrating pick-up-truck platforms with those for AUV and derivative vehi-cles to maximize sales volume on a global basis, and optimiz-ing operating efficiency by relocating engineering functions to Thailand and consolidating manufacturing and procure-ment functions. These steps should ensure that we retain capital to invest in next-generation global strategic vehicles.

Isuzu intends to increase the supply volume of diesel en-gines to the GM Group and grow the DE business in China to expand and sustain growth of the DE business. As the ini-tial step, we plan to pioneer a customer base in the industrial machinery market to strengthen Isuzu’s brand power along-side developing sales-related infrastructure.

09

10

Isuzu Developments

Isuzu is developing trucks that fulfill both environmental and economical requirements to the highest standards. One of the first manufacturers to intro-duce diesel engines that comply with the latest emissions regulations, we are striving to make a contribution towards preventing global warming and combat air pollution in urban areas.

Meeting new emissions rules

11

In June 2005 we introduced new FORWARD medium- duty trucks. Developed in line with the concept “economy for the customer, and harmony with the earth and soci-ety,” the new trucks are equipped with a newly developed 4HK1 engine. With this engine, Isuzu has not only met Japan’s new long-term (2005) emissions standards, but even achieved NOx and PM emissions levels—2.0g/kWh and 0.027g/kWh, respectively—that almost clear the EU’s far-stricter Euro V automobile emissions targets scheduled to take effect in 2008 or later.

In developing the new engine, we employed our own electronic control technology for overall control of perfor-mance features including the electronic common rail system, VGS turbo, DPD system and twin EGR cooler to enhance its potential. The environmental performance of the new trucks was enhanced without relying on post-treatment of emissions—they offer 5% improvement in fuel economy and weigh 50kg less than previous models. The Smoother-F advanced semi-automatic transmission has been adapted to high output (240hp and 260hp) engines, and is now avail-able with all models in the FORWARD series

Large ERGA route bus added to new model lineupIsuzu added a new model to the ERGA large route bus se-

ries that complies with Japan’s new short-term (2003–2004)emissions regulations and also qualifies for designation as “three star-rated ultra-low-PM-emissions diesel vehicles” by the Ministry of Land, Infrastructure and Transport (MLIT), with 75% reduced particulate matter (PM) emissions. The ERGA Non-Step went on sale nationwide on December 21, 2004. Combining eco-friendly features with concern for passenger welfare, it also qualifies for the Ministry of Land Infrastructure and Transport’s Non-Step Bus designation. Equipped with a smaller, more lightweight new 6HK1-TCC

Isuzu Motors Limited Annual Report 2005

engine, the new ERGA is designated a “good low-pollution vehicle” by eight prefectures in the Tokyo area and a “low-pollution vehicle” by six prefectures in the Kyoto–Osaka–Hyogo region. Maximum capacity has been increased by four to 86 passengers in one model. It also boasts 5% better fuel economy than previous models.

CV Telematics system upgradedOn February 28, 2005, we expanded both the reporting

system and the range of vehicles covered by the Mimamori-kun Online Service, a real-time vehicle diagnostics system initially provided for the GIGA series of heavy-duty trucks. As a result of the upgrade, the service is now available for the ELF Series of light duty and FORWARD Series of medium duty trucks. Customers are mainly logistics companies that use the service to monitor vehicle information including fuel consumption, emissions levels, and driver habits such as gear shifting, acceleration, and braking behavior. In addition to providing valuable new information, the upgraded report-ing system now alerts customers to delivery vehicles that are running late and suggests maintenance procedures based on data analysis for each vehicle. The initial cost has come down because of lower component prices, and a flat-rate monthly charge has replaced the previous structure of a basic fee plus communications charge.

The Mimamori-kun Online Service

SpeedySupport

Packettelecommunicationsnetwork

Trucking companies

Freight transportcompanies

Ohayaku(quick response)center24-hour emergencyrepair/service response

Isuzu“Mimamori” center

Isuzu Dealer

Data collection and analysis

Maintenance data

Fuel-efficiency diagnosisOperational data

Transport quality dataEnvironmentalimpact report

Fuel consumptiontraffic information data

Driving operation dataEngine operation data

Vehicle speed, accelerationand deceleration data

GPScommunicationssatellite

=+

Vehicle control computer data • Driver’s driving data • Details about truck operation

Mimamori data

External informationsuch as GPS data

Internet

12

Environmental & Social Responsibilities

Environmental efforts

Isuzu strives to be a leader in environmen-tal responsibility. We take a two-pronged approach, aiming to develop cleaner vehicles and minimize the environmental burden of our manufacturing facilities.

13

Contributing toward slowing global warmingNow that the Kyoto Protocol—an agreement among

developed countries that set targets for the reduction of greenhouse gases—has taken effect, companies are re-quired to dig deeper in their efforts to counteract global warming. Two specific examples of Isuzu’s approach to applying the brakes to global warming are participation in the Japanese government-led Team Minus 6% Project and developing products that help combat global warming.

The Isuzu Global Environmental Committee decided that the company should join the Team Minus 6% Project, and the Isuzu Team Minus 6% program kicked off on June 20, 2005.

Purpose of participationAs a CV/DE manufacturer, Isuzu’s mainstay business is to

provide fuel-efficient vehicles—vehicles with low CO2 emis-

sions—worldwide. Our Mimamori-kun Online Service, built around a vehicle diagnostic system that collects and ana-lyzes data on driving habits to help truck drivers improve their fuel economy—also contributes toward slowing global warming.

We decided to take part in the Team Minus 6% Program because we believe that, as good global citizens, Isuzu as a company and Isuzu employees as individuals must do their utmost to curtail CO

2 emissions in all aspects of daily activity

as well as through our mainstay business. We look forward to seeing active participation from all employees in our ef-forts to help create an environmentally sustainable society.

Isuzu’s team structureWe intend to develop specific action programs for the fol-

lowing committees: Plant Environment Committee, Product Development Environment Committee, Sales and Service Environment Committee, and General Affairs Committee. All Isuzu group companies and sales companies will be tak-ing part in the program—Isuzu group companies and all their employees are members of the Isuzu Team.

Action planIsuzu decided on the following policies in line with guide-lines set by the Japanese government:1. Set air conditioner thermostats at plants, headquarters

offices, and in homes at 28ºC. Employees are encouraged to dispense with suit jackets and ties during the summer, from June through September (Cool Biz dress code).

2. Turn off water taps after use and fix leaks immediately.3. Minimize engine idling when driving delivery vehicles,

conveyance vehicles, and private cars.4. Use energy-saving appliances and eco-friendly household

goods.5. Avoid use of unnecessary packaging and take own shop-

ping bags to the store.6. Turn off power outlets and mains supplies when not in use.

Isuzu Motors Limited Annual Report 2005

The Team Isuzu’s targetOur target is to reduce CO

2 emissions by 6% from their

current level by 2010. This is an ambitious undertaking on a consolidated basis and it assumes our current production volume remains constant. We remain committed to taking aggressive steps to help counteract global warming, such as by introducing energy-efficient facilities.

Developing cleaner vehiclesIn April 2005, Isuzu announced the addition of a new

model that runs on compressed natural gas (CNG) to its lineup of ELF low-pollution, light-duty trucks. The ELF CNG-MPI is the first CNG vehicle that meets the new long-term exhaust emissions regulations and conforms to proposed post new long-term exhaust emissions standards for diesel engines. Equipped with a 4.6-liter new 4HV1 multi-point in-jection (MPI) engine, the ELF CNG-MPI sets a new standard for the low emissions levels typical of CNG vehicles. Power and performance has also been upgraded with best-in-class maximum output of 96kW (130PS) and maximum torque of 363N.m (37.0kg.m). Demand for vehicles that use natural gas as fuel is growing among local governments and logis-tics companies in major cities that suffer from severe air pol-lution problems. Since its debut, sales of the ELF CNG range has topped 7,000 units and maintained a dominant market share of approximately 70%. The latest model combines the low noise, low-vibration advantages of CNG vehicles with excellent fuel economy.

Also in April 2005, Isuzu announced the addition of a new diesel hybrid truck to the ELF range of low pollution, light-duty trucks. The new ELF Hybrid, based on the 4HL1 diesel engine, achieves low-CO

2 emission levels and high fuel effi-

ciency by fully recovering energy available when the vehicle decelerates. A diesel vehicle that can be serviced anywhere, the ELF Hybrid achieves world-class fuel economy compared with other hybrid vehicles and delivers the high durability and safety performance required of commercial vehicles. It has been certified as an ultra-low PM emission diesel vehicle and designated a “good low-pollution vehicle” by eight prefectures in the Tokyo area. As well as the standard Smoother-E automatic shift, the ELF Hybrid is equipped with a secure PTO-type parallel drive hybrid system, with the mo-tor and generator installed on a shaft different from that of the engine. This ensures that in the event of a failure of the hybrid system, the vehicle can continue to drive using the diesel engine. Furthermore, it is the first Japanese truck to use a lithium ion battery.

Isuzu positions the two new series—CNG-MPI vehicles with excellent low-emissions performance and practical diesel hybrid vehicles that require no specific fuel infrastruc-ture— as the two mainstays of its low-pollution vehicle lineup.

14

Corporate governance is a major priority at Isuzu. In the current climate of growing pressure to be accountable for management decisions and actions, providing effective and appropriate checks and balances, and earning the confidence of investors and the public by communication and disclosure, we are taking steps to address these needs and developments.

In recent years, we have taken the following steps to enhance our corporate governance:

• To strengthen the local management structures for our North American and ASEAN operations, in June 2003 we unified the oversight of each of these regions.

• In December 2003, our president and representative director certified that the content of the first half earnings report submitted to Japanese regulatory authorities were accurate.

• To strengthen the local management structures for our Chinese operations, in April 2004 we established unified oversight for China.

• With the aim of strengthening internal controls and ensuring indepen-dence, also in April 2004 we transformed the Audit Group of the General Affairs and HR Department into the independent Business Audit Group, and we began conducting our internal audits under this new structure.

• As part of our sustainability governance program, in 1999 we started pub-lishing an annual Environmental Report that records the company’s environmen-tal management performance and progress with a range of initiatives to reduce environmental impact, reduce waste, and promote recycling. The first English version of the Environment Report was published in 2000.

We are committed to disclosing information in adherence to fair business practices and corporate transparency. We distribute information through various channels, including a comprehensive company website. We are pleased to pro-vide English-language information for our shareholders and other stakeholders around the globe.

Isuzu’s Audit Committee has five members, including two outside auditors. We have established a Management Committee that is empowered to deliber-ate and make decisions on critical business matters. We have also introduced an executive officer system, which transfers the authority for executing business strategies to the operating level. In addition, we have implemented a Vehicle Line Executive (VLE) scheme. The Vehicle Line Executives, who are responsible for each of our product areas—commercial vehicles, light commercial vehicles and power-trains—report directly to the Management Committee.

The board of directors and the audit committee each meet at least once per month, and the Management Committee convenes weekly.

• In April 2005 we set up a Compliance Committee to provide impartial advice,oversight, and assessment of progress and organizational structure for compli-ance. To ensure fairness and transparency, we appointed professionals including lawyers from outside the company as members of the Compliance Committee.

• A Compliance Management Department was also established within the company to administer and promote compliance-related business activities. Reporting directly to the president, the department consists of two groups— the Compliance Group responsible for compliance planning, implementation, and review, and the Internal Audit Group.

• In fiscal 2005, as well as establishing the Compliance Committee and Compliance Management Department, we set up a helpline at a law firm that employees could use to report compliance issues in confidence. The purpose of the helpline is to obtain information about compliance issues in the company.

Corporate Governance

14

15

F I N A N C I A L S E C T I O N

I S U Z U M O T O R L I M I T E D

ANNUAL REPORT 2005

Five-Year Summary 16

MD&A 17

Consolidated Balance Sheets 20

Consolidated Statements of Operations 22

Consolidated Statements of Shareholders‘ Equity 23

Consolidated Statements of Cash Flows 24

Notes to Consolidated Financial Statements 25

Report of Independent Auditors 36

16

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

Consolidated Five-Year SummaryMillions of yen

Thousands ofU.S. dollars

2005 2004 2003 2002 2001 2005

For the Year:

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Operating income (loss)

Income (loss) before special items

Income (loss) before income taxes

Net income (loss)

At Year-End:

Total assets

Shareholders' equity

Non-Consolidated Five-Year SummaryMillions of yen

Thousands ofU.S. dollars

2005 2004 2003 2002 2001 2005

For the Year:

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Operating income (loss)

Income (loss) before special items

Income (loss) before income taxes

Net income (loss)

At Year-End:

Total assets

Shareholders' equity

Note: U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥107.39=US$1; the approximate exchange rate prevailing on the Tokyo Foreign

Exchange Market on March 31, 2005.

¥ 1,569,199

1,343,166

226,032

253,349

(27,316)

(47,435)

(73,300)

(66,787)

¥ 1,891,492

94,108

¥ 1,597,701

1,355,190

242,510

227,376

15,134

(1,984)

(28,506)

(42,991)

¥ 1,324,144

61,084

¥ 1,349,449

1,171,366

178,083

162,621

15,462

(4,200)

(111,527)

(144,301)

¥ 1,028,844

26,434

¥ 1,430,339

1,214,763

215,576

131,085

84,490

81,678

55,357

54,713

¥ 1,077,816

109,753

$13,907,883

11,811,935

2,095,947

1,283,818

812,128

852,546

640,352

559,058

$ 10,639,544

1,475,591

¥ 1,493,567

1,268,483

225,083

137,869

87,214

91,555

68,767

60,037

¥ 1,142,580

158,463

$ 8,195,103

6,782,474

1,412,628

848,644

563,984

501,976

208,079

251,602

$ 7,566,085

1,576,995

¥ 829,890

726,601

103,289

107,002

(3,712)

(10,578)

(66,105)

(57,938)

¥ 1,032,614

217,788

¥ 761,904

655,719

106,185

98,098

8,086

2,123

(45,898)

(56,224)

¥ 876,680

159,062

¥ 760,608

656,576

104,032

90,904

13,128

4,880

(146,966)

(189,447)

¥ 717,601

82,743

¥ 890,336

730,395

159,941

92,945

66,995

57,561

32,221

38,857

¥ 808,674

151,722

¥ 880,072

728,369

151,702

91,135

60,566

53,907

22,345

27,019

¥ 812,521

169,353

17

Isuzu Motors Limited Annual Report 2005

Results of Operations

Significant accounting policiesThe consolidated financial statements of the Isuzu group are prepared in

accordance with the generally accepted accounting principles of Japan. In the preparation of these statements, the amounts recorded for items including bad debt allowance, inventory, investments, income taxes, retirement benefits, and provisions for product warranties are estimates that reflect the judgment of management. Because of the uncertain nature of estimates, in some cases ac-tual results may vary from initial estimates, and this may have a negative impact on earnings results.

SalesIn fiscal 2005 (ended March 31, 2005) Isuzu’s consolidated-basis sales rose 4.4% from the previous year to ¥1,493,567 million, as worldwide vehicle unit sales increased 20.9% to 339,162 units.

Although the Japanese economy made a gradual recovery on improved capi-tal expenditure and corporate earnings trends, the outlook was clouded in the second half by rising raw material prices and the impact of yen appreciation. In the commercial vehicle market, overall demand for standard trucks declined 15.0% from the previous fiscal year to 99,584 units and demand for 2–3 ton trucks fell a sharp 22.4% to 114,176 units as demand associated with the intro-duction of new emissions regulations ran its course. In this environment, Isuzu gained market share through aggressive sales initiatives to capture 27.4% share of the standard truck market (up 2.5 percentage points from the previous year) and 38.4% share of the 2–3 ton truck market, an increase of 2.3 percentage points from the previous year. As a result, domestic sales declined a marginal 0.3% to ¥625,749 million.

Sales in Asia grew 11.3% from the previous fiscal year to ¥374,172 mil-lion from the impact of consolidating Thai manufacturing operations including Isuzu Motors Co., (Thailand) Ltd. and brisk sales in China and the ASEAN region where Isuzu pioneered its business ahead of competitors. In the Thai market, where pickup trucks account for around 60% of the total, Isuzu pickup trucks held 38% market share, sustaining steady sales growth despite intensifying competition.

North American sales fell 15.0% to ¥213,901 million as we withdrew from local SUV production and shifted emphasis to profit.

Sales in other regions grew a sharp 30.0% to ¥279,744 million, mainly be-cause of increasing exports of pickup trucks produced in Thailand to other regions.

Operating incomeOperating income for fiscal 2005 was a record ¥87,214 million, up 3.2% from

a year earlier. Rationalization, including raw material expense reduction, contribut-ed ¥12,600 million, consolidation of manufacturing operations in Thailand added ¥5,000 million, and lower depreciation and other expense cuts had a ¥4,000 mil-lion positive impact on operating income, offset against ¥12,700 million negative impact from increased expenses, ¥3,800 million from a worsening sales mix, and ¥2,400 million due to foreign exchange fluctuations.

Looking at each of our key business areas, operating income at the parent company declined ¥6,400 million from the previous year to ¥60,500 million, be-

cause rationalization such as raw material cost savings and expense cuts could not fully compensate for a fall in gross profit on lower domestic vehicle sales and increases in raw materials prices, and selling and R&D expenses.

Consolidated sales subsidiaries in Japan posted an operating income of ¥6,000 million, down ¥1,500 million from the previous year. Lower domestic demand weighed on profits despite efforts to improve efficiency such as review-ing sales bases.

In North America, the operating loss shrank ¥1,000 million to ¥400 million as a result of progress with structural reform, including withdrawal from local SUV production.

In ASEAN, operating income grew ¥8,000 million to ¥15,200 million due largely to the consolidation of Thai manufacturing operations and sustained brisk pickup truck sales in Thailand.

(The figures shown for each of our key business areas above reflect the sim-ple addition of the profits and losses of the parent company and consolidated subsidiaries, grouped according to the characteristics of each unit.)

As a result, our operating margin contracted 0.1 percentage point from 5.9% in fiscal 2004 to 5.8% in fiscal 2005.Note: operating income yen amounts are then rounded down in thousands

Non-operating gains/lossesIn fiscal 2005 we posted a non-operating profit of ¥4,340 million, an im-

provement of ¥7,152 million from the previous year. Equity-method profit increased ¥5,449 million to ¥15,811 million because of

continuing strong performance of engine manufacturing operations in North America and Poland (both equity-method companies) and group companies in Japan.

Progress with reduction of interest-bearing debt resulted in a ¥700 million improvement in net interest (interest received minus interest paid) to ¥10,500 million. We posted a foreign exchange gain of ¥500 million in fiscal 2005, an improvement of ¥2,700 million from fiscal 2004.

Extraordinary gains/lossesIn fiscal 2004, we posted an extraordinary loss of ¥26,321 million, mainly

associated with the overhaul of our domestic sales network such as disposal of fixed assets in the process of adjustments to our real estate holdings, and the restructuring of our North American business. In fiscal 2005, the extraordi-nary loss improved ¥3,532 million to ¥22,788 million. Main extraordinary loss items were associated with consolidation and reorganization of the domestic sales network and disposal of fixed assets accompanying the relocation of the Kawasaki plant.

TaxesIn fiscal 2004, Isuzu’s net tax expense, including corporate income taxes, mu-

nicipal taxes, and business taxes and after adjustments was a ¥77 million gain, but in fiscal 2005 it was a net expense of ¥6,245 million because of increased corporate tax payments at the parent and ASEAN subsidiaries.

Minority InterestsMinority interests consist primarily of profits returned to the minority share-

holders of our locally incorporated subsidiaries in ASEAN and North America. The figure increased from ¥720 million on fiscal 2004 to ¥2,484 million in fiscal 2005.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

700

600

500

400

300

200

100

0North America Asia Others

Geographical Segment Information — Sales

FY2003

FY2004

FY2005

378

252214 211

336374

Japan

215

280287

474

627 626

(Billions of yen)

116 5

80

60

40

20

0

-20

-40

48 6

-24

-1 -0

3 7 10

-2

1

Parent JapaneseDLRs

North America ASEAN Others Eliminations

Business Areas Segment Information — Operating Income

(Billions of yen)

FY2003

FY2004

FY2005

6761

1313 15

18

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

Net ProfitIn fiscal 2005 our net profit was ¥60,037 million, an increase of ¥5,324 mil-

lion from the prior year. Earnings per share came to ¥56.64 and fully diluted earnings per share to ¥25.79.

Segment informationJapan

In Japan, there was a reactionary decline in overall demand after a sharp in-crease in the previous fiscal year due to the introduction of stricter diesel emis-sions rules. Nonetheless, domestic sales increased 2.1% from a year earlier to ¥1,087,862 million because of strong growth in export sales. However operat-ing profit declined 5.5% to ¥72,931 million, despite sustained streamlining and fixed expense reduction efforts undertaken under our New Three-Year Business Plan.North America

North American sales fell 14.7% to ¥200,888 million, largely attributable to the withdrawal from local SUV production. Our North American operating loss narrowed from the previous year’s ¥688 million to ¥229 million despite costs incurred by the withdrawal. Asia

Sales in Asia surged 41.2% to ¥296,598 million chiefly due to brisk sales of our pickup trucks in Thailand. The D-MAX pickup truck launched in May 2002 remains the best-selling vehicle ever in Thailand. Operating profit also grew 124.4% to ¥14,082 million.Other regions

Sales in other regions grew 27.9% to ¥33,192 million as a result of marketing activities in Australia, but operating profit fell 5.5% to ¥1,322 million.

Financial ConditionCash Flow

In fiscal 2005 Isuzu generated net cash flow of ¥135,252 million, up ¥32,672 million from the prior year. Despite a higher net income before taxes, net cash provided by operating activities declined ¥19,761 million from a year earlier to ¥65,531 million because of an increase in equity-level investment profit and corporate tax payments, and temporary increase in accounts receivable pri-marily associated with Thai manufacturing operations becoming consolidated subsidiaries.

Net cash used in investing activities declined ¥2,127 million to ¥7,795 million. Capital investments made mainly by the parent company and operations in the ASEAN region were offset by ¥11,319 million of inflows from the sale of invest-ment securities and ¥16,865 million from the sale of fixed assets.

Net cash used in financing activities declined ¥2,631 million to ¥26,366 mil-lion. While we used cash generated by operating activities as a resource in our continued effort to shrink liabilities, we also redeemed ¥60,000 million of class 2 preferred stock during the fiscal year. Revenue-wise we raised ¥100,000 mil-lion for R&D and capital investment from our second unsecured convertible bond issue. Isuzu also restructured its borrowings in February 2005 by repay-ing all existing loans and signing a syndicated loan agreement consisting of a ¥240,000 million term loan and ¥62,000 million commitment line to secure liquidity.

AssetsAs of March 31, 2005, total consolidated assets were ¥1,142,580 million, an

increase of ¥64,763 million from a year earlier.Main factors contributing to the increase were cash reserves, which grew

¥26,042 million from ¥113,315 million to ¥139,357 million, notes and accounts receivable (up ¥31,810 million from ¥216,934 million to ¥248,744 million), in-ventory (up ¥11,588 million from ¥112,938 million to ¥124,526 million), and tangible fixed assets (up ¥9,482 million from ¥449,131 million to ¥458,613 mil-lion). Cash reserves increased because of cash flow from operating activities re-sulting from record profits and strengthened cash management structure, while

increases in notes and accounts receivable, inventory, and tangible fixed assets were mainly associated with the consolidation of manufacturing operations in Thailand.

The ¥5,118 million decline in long-term borrowings from ¥27,409 million to ¥22,291 million is also mainly attributed to the offset and elimination of the outstanding loan balance of newly consolidated Thai manufacturing operations in the consolidated accounts.

LiabilitiesTotal liabilities increased ¥4,997 million from a year earlier to ¥969,928 mil-

lion. Interest-bearing liabilities (total of short-term borrowings, commercial pa-per, corporate bonds with less than a year to redemption, corporate bonds, and long-term borrowings) decreased ¥53,561 million from ¥446,664 million to ¥393,103 million.

In fiscal 2005 we concluded a syndicated loan agreement consisting of a ¥240,000 million term loan and ¥62,000 million commitment line to ensure li-quidity after repaying all of our existing borrowings. This led to a sharp decrease in short-term borrowings and an increase in long-term borrowings.

The balance of our second unsecured convertible bond stood at ¥56,000 million on March 31, 2005, adding ¥50,000 million to our liabilities compared with the previous fiscal year.

CapitalIn fiscal 2005, our capital grew ¥48,710 million to ¥158,463 million.

Although ¥60,000 million of class 2 preferred stock was redeemed during the fiscal year, ¥60,037 million of net profit was generated in addition to the ex-ercise of ¥50,000 million of convertible bonds increasing capital by the same amount. Consequently our equity ratio improved 3.7 percentage points from a year earlier to 13.9%.

RisksIn 2002, in response to the protracted slump in the Japanese commercial

vehicle market and lackluster SUV sales in the U.S., the Isuzu group drew up its New Three-Year Business Plan covering the three-year period to March 2005 to restore corporate value and strengthen corporate competitiveness.In the interim period ended September 2002, Isuzu showed a temporary nega-tive net worth due to the poor performance of its subsidiaries. However, thanks to steps taken under the New Three-Year Business Plan, such as a private place-ment of new shares and the exchange of debt for equity, the company showed a positive net worth again in March 2003. In fiscal 2005, the final year of the plan, we continued our efforts to strengthen business functions and shore up our profit structure. Being well on track to achieving our goals, in November 2004 we formulated a new business plan ending in March 2008, and approved the resumption of dividend payments at the 103rd annual general meeting of shareholders on June 29, 2005. However, there are certain risks that could have significant impact on our earnings results, financial condition, or share price, and these risks are outlined below. (The following information contains for-ward-looking statements that reflect the judgment of management as of March 31, 2005).

1. Economic situation/supply and demand trends in our major marketsVehicles account for an important portion of the Isuzu group’s worldwide

operating revenue, and demand for these vehicles is affected by the economic situation in the various countries and regions and markets where we sell ve-hicles. Therefore, economic recession and an ensuing decline in demand in our major markets—Japan, North America, and other Asian countries—could have a negative impact on the earnings and financial position of the Isuzu group. Price competition also entails the risk of price fluctuation for our products.

2. Interest rate fluctuationsThe Isuzu group tightened its cash flow management and continues to con-

centrate on shrinking interest-bearing debt. Under the New Three-Year Business Plan, we allocated profit from business operations and other funds to the reduc-

19

Isuzu Motors Limited Annual Report 2005

tion of interest-bearing debt, whose balance stood at ¥393,103 million (exclud-ing convertible bonds) at the end of fiscal 2005—¥53,561 million less than a year earlier. This is still a relatively large balance, however, leaving us vulnerable to the risk of higher interest payments having a negative impact on earnings and financial position of the Isuzu group should market rates rise sharply.

3. Foreign exchange fluctuationsThe business of the Isuzu group includes manufacturing and marketing

products in several regions around the world. Local currency amounts for sales, expenses, assets and other items are therefore converted into Japanese yen in the preparation of our consolidated financial statements. Depending on the exchange rate in effect at the time of conversion, the yen amount for these items may change even if the underlying local currency value has not changed. Generally, a strengthening of the yen relative to other currencies has a negative impact on the business of the Isuzu group, and a weakening of the yen has a positive impact.

4. Dependence on General Motors Corporation and other major customers

The Isuzu group supplies vehicles and vehicle components to General Motors Corporation (Detroit, MI) and its affiliates as well as to other vehicle manufac-turers on an OEM basis. Sales to these customers are affected by fluctuations in production and sales at these customer companies and other factors over which the Isuzu group has no control, and therefore they could have a negative effect on the earnings and financial position of the Isuzu group.

5. Suppliers, subcontractors, etc., of parts and materialsThe Isuzu group sources the raw materials, components, and products re-

quired for production from outside suppliers. Should supply-demand condi-tions significantly exceed suppliers’ capacity, it is possible that we are unable to source sufficient volume. Shortages of, and delays in the supply of parts, etc., could have a negative impact on the earnings and financial position of the Isuzu group.

6. Product defectsAt its plants both inside and outside of Japan, the Isuzu group manufactures

its products according to the strictest globally accepted quality control stan-dards. However, in the unusual event of a large-scale recall or product liability award, there could be a negative impact on the earnings and financial position of the Isuzu group.

7. Joint venturesThe Isuzu group engages in business in some countries in the form of joint

ventures due to legal and other requirements of each country. Changes in man-agement policy, operating environment, etc., of these joint ventures can affect their earnings performance, which could produce a negative impact on the earnings and financial position of the Isuzu group.

8. Disasters, power outages, and other interruptionsTo minimize the potential of a negative impact due to an interruption in the

manufacturing process, the Isuzu group regularly conducts disaster prevention inspections and facilities examinations at all of our sites. However, we may not be able to completely eliminate or minimize the impact that would arise from a disaster, power outage, or other interruption during the manufacturing process.

9. Securities investmentsThe Isuzu group invests in securities to produce, sell, and distribute its prod-

ucts as well as to build and maintain good relationships with its business part-ners. For marketable securities, a downturn in share prices could have a negative impact on the earnings and financial position of the Isuzu group. Isuzu provides management guidance and advice to companies—including those in which we have invested through non-marketable securities—that can have a strong influ-ence over our own business results. However, if the financial condition of the companies in which we have invested were to deteriorate due to factors such as a worsening business environment, this could have a negative impact on the

earnings and financial position of the Isuzu group.

10. Retirement obligations and deferred tax assetsThe figures recorded for “retirement obligations” and “deferred tax assets”

are estimates that reflect the judgment of management. Because of the uncer-tain nature of estimates, in some cases actual results may vary from initial esti-mates, and this could have a negative impact on earnings results.

11. Potential risks associated with international activities and foreign ventures

The Isuzu group conducts some of its manufacturing and marketing activi-ties outside of Japan—in the U.S. and in developing and emerging markets in Asia. The following risks are inherent to such overseas business development, and could have a negative impact on the earnings and financial position of the Isuzu group.

• Unfavorable changes in the political or business climate• Difficulties in recruiting and retaining personnel• Inadequate technological infrastructure could have a negative impact on

our manufacturing activities or on our customers’ support of our prod- ucts and services.

• Potential negative tax consequences• Social unrest stemming from terrorism, war or other factors.

12. Limits on intellectual property protectionThe Isuzu group has accumulated technology and expertise that differenti-

ates us from our rivals; however, in certain regions due to legal restrictions we are unable to fully protect or we are able to only partly protect some of our pro-prietary technology and expertise through intellectual property rights. As a re-sult, we may be unable to effectively prevent third parties from using our intel-lectual property to make similar products.

13. Legal requirementsThe Isuzu group is subject to various government regulations in the countries

in which it does business, such as business and investment approvals, export controls designed to protect national security, and other import/export regula-tions such as tariff rules. We are also subject to legal requirements concerning areas such as commerce, antitrust, patents, consumer rights, taxation, foreign exchange, recycling and safety. Unexpected changes in these regulations could have a negative impact on the earnings and financial position of the Isuzu group. Exhaust emissions regulations are generally being tightened amid grow-ing environmental awareness. Since substantial investment is required to comply with these regulations, failure to generate sufficient sales to recover this invest-ment could have a negative impact on the earnings and financial position of the Isuzu group.

14. Impairment accountingThe Isuzu group owns and leases facilities used in manufacturing, marketing

and distributing our products. Japan is preparing to introduce impairment ac-counting for fixed assets used in the course of business, and if it becomes nec-essary to treat some fixed assets that are owned or used through finance leases as impaired, this could have a negative impact on the earnings and financial po-sition of the Isuzu group.

15. Sale of Kawasaki Plant propertyWe have been notified of a claim for damages stemming from soil contami-

nation of natural origin at a parcel of property at our Kawasaki plant location, which we sold in July 2001 to the Urban Renaissance Agency, an independent administrative institution. Depending on the course of this claim, this could have a negative impact on the earnings and financial position of the Isuzu group.

16. Preferred sharesIsuzu issued preferred shares on December 26, 2002. These shares could be

exchanged for common shares at some time in the future, and this could result in the dilution of the existing common shares.

20

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets (As of March 31, 2005, 2004 and 2003)

Millions of yenThousands ofU.S. dollars

¥ 113,315

216,934

(4,806)

112,938

27,651

31,618

497,651

32,152

30,321

27,409

8,484

38,847

(12,895)

124,321

273,639

205,689

535,231

7,956

(573,386)

449,131

6,713

¥ 1,077,816

¥ 63,389

204,371

(8,331)

108,972

16,614

48,155

433,170

20,387

25,316

28,799

10,697

42,478

(14,937)

112,741

281,873

236,600

558,851

3,938

(604,072)

477,191

5,739

¥ 1,028,844

Assets 2005 2004 2003 2005

Current Assets:

Cash and cash equivalents (Note 2, 4)

Receivables:

Notes and accounts (Note 4)

Less : allowance for doubtful receivables

Inventories

Deferred taxes (Note 6)

Other current assets

Total Current Assets

Investments and Advances:

Investments (Note3, 4):

Unconsolidated subsidiaries and affiliated companies

Others

Long-term loans

Deferred taxes (Note 6)

Other investments and advances

Less : allowance for doubtful accounts

Total Investments and Advances

Property, Plant and Equipment (Note 4)

Land

Buildings and structures

Machinery and equipment

Construction in progress

Less : accumulated depreciation

Net Property, Plant and Equipment

Other Assets

Total Assets

$ 1,297,676

2,316,272

(47,075)

1,159,573

265,207

299,489

5,291,144

340,232

268,199

207,576

79,864

305,985

(195,392)

1,006,467

2,494,350

2,015,420

5,344,549

69,589

(5,653,366)

4,270,544

71,387

$ 10,639,544

¥ 139,357

248,744

(5,055)

124,526

28,480

32,162

568,215

36,537

28,801

22,291

8,576

32,859

(20,983)

108,084

267,868

216,436

573,951

7,473

(607,114)

458,613

7,666

¥ 1,142,580

21

Isuzu Motors Limited Annual Report 2005

Millions of yenThousands ofU.S. dollars

Liabilities and Shareholders' Equity 2005 2004 2003 2005

Current Liabilities:

Bank loans

Current portion of bonds

Commercial paper

Notes and accounts payable

Accrued expenses

Accrued income taxes (Note 6)

Deposits received

Other current liabilities

Total Current Liabilities

Long-Term Debt (Note 4)

Accrued Retirement and Severance Benefits (Note 5)

Deferred Tax Liabilities (Note 6)

Deferred Tax Liabilities Related to Land Revaluation (Note 9)

Other Long-Term Liabilities

Minority Interests

Contingent Liabilities (Note 10)

Shareholders' Equity :

Common stock and preferred stock (Note 7,8)

Preferred stock:

Class I-authorized 37,500,000 shares; issued 37,500,000 shares in 2005, 2004 and 2003

Class II-authorized 37,500,000 shares; issued 37,500,000 shares in 2004 and 2003

Class III-authorized 25,000,000 shares; issued 25,000,000 shares in 2005, 2004 and 2003

Class IV-authorized 25,000,000 shares; issued 25,000,000 shares in 2005, 2004 and 2003

Common stock:

Authorized 3,369,000,000 shares in 2005, 2004 and 3,000,000,000 shares in 2003;

Issued 1,073,619,832 shares in 2005, 878,105,748 shares in 2004 and 748,526,911 shares in 2003

Capital surplus (Note 7)

Accumulated deficit

Variance of land revaluation (Note 9)

Unrealized holding gain on securities

Foreign currency translation adjustments

Less: treasury stock, at cost 1,112,221 common shares in 2005

Total Shareholders' Equity

Total Liabilities, Minority Interests and Shareholders' Equity

¥ 256,762

15,000

1,800

268,206

42,451

6,501

12,824

40,401

643,948

179,102

60,284

5,016

57,167

19,411

3,132

67,564

67,461

(111,058)

90,485

7,518

(12,049)

(168)

109,753

¥ 1,077,816

¥ 299,869

15,500

—

247,257

49,335

1,633

13,912

33,348

660,857

202,551

58,487

2,107

56,296

19,333

2,775

55,545

131,850

(242,546)

90,064896

(8,883)

(492)

26,434

¥ 1,028,844

$ 1,410,873

—

—

2,593,456

503,262

98,596

104,349

335,727

5,046,266

2,771,127

559,243

43,704

461,600

149,889

132,120

303,732

395,155

97,408

724,381

77,518

(120,552)

(2,051)

1,475,591

$ 10,639,544

¥ 151,513

—

—

278,511

54,045

10,588

11,206

36,053

541,918

297,591

60,057

4,693

49,571

16,096

14,188

32,617

42,435

10,460

77,791

8,324

(12,946)

(220)

158,463

¥ 1,142,580

22

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

Consolidated Statements of Operations (For the years ended March 31, 2005, 2004 and 2003)

Millions of yenThousands ofU.S. dollars

2005 2004 2003 2005

Net Sales

Cost of Sales

Gross Profit

Selling, General and Administrative Expenses (Note 5,12)

Operating Income

Other Income (Expenses):

Interest and dividend income

Interest expense

Equity in earnings of unconsolidated subsidiaries and affiliates

Others, net

Income (Loss) before Extraordinary Items

Extraordinary Items:

Gain (loss) on sales or disposal of property, plant and equipment, net

Gain on sales of investments

Gains on return of substituted portions of employee pension fund (Note 2,5)

Loss on revaluation of investments

Loss on business model reform

Loss on restructuring of domestic subsidiaries & affiliates

Loss on investment for affiliated company restructuring

Severance benefit of early retirement plan

Others, net

Income (Loss) before Income Taxes and Minority Interests

Income Taxes (Note 6):

Current

Deferred

Minority Interests in Income of Consolidated Subsidiaries

Net Income (Loss)

Yen U.S. dollars

Per Share of Common Stock

Net Income (Loss)

Basic

Diluted

See accompanying notes to consolidated financial statements.

¥ 1,349,449

1,171,366

178,083

162,621

15,462

2,724

(18,026)

(726)

(3,633)

(4,200)

(504)

9,947

13,437

(9,538)

(12,201)

—

(76,752)

(24,808)

(6,906)

(111,527)

5,103

25,348

2,323

¥ (144,301)

¥ (131.34)

—

¥ 1,430,339

1,214,763

215,576

131,085

84,490

2,370

(13,116)

10,362

(2,428)

81,678

(7,865)

5,488

—

(5,333)

—

—

(7,785)

—

(10,824)

55,357

7,828

(7,905)

720

¥ 54,713

¥ 72.37

20.90

¥ 1,493,567

1,268,483

225,083

137,869

87,214

3,002

(12,564)

15,811

(1,909)

91,555

(12,377)

5,807

—

(6,056)

—

(5,573)

—

—

(4,586)

68,767

14,648

(8,403)

2,484

¥ 60,037

¥ 56.64

25.79

$ 13,907,883

11,811,935

2,095,947

1,283,818

812,128

27,961

(117,001)

147,235

(17,777)

852,546

(115,257)

54,074

—

(56,399)

—

(51,903)

—

—

(42,708)

640,352

136,405

(78,249)

23,137

$ 559,058

$ 0.53

0.24

23

Isuzu Motors Limited Annual Report 2005

Consolidated Statements of Shareholders’ Equity (For the years ended March 31, 2005, 2004 and 2003)

Millions of yenThousands ofU.S. dollars

2005 2005 2004 2003 2005

Common Stock and Preferred Stock:

Balance at beginning of the year

Add:

Issuance of common stock

Issuance of preferred stock

The exercise of stock acquisition right

Deduct:

Capital deduct (retirement of class II preferred stock)

Capital deduct (off-set with deficit)

Balance at end of the year

Capital Surplus:

Balance at beginning of the year

Add:

Issuance of common stock

Issuance of preferred stock

The exercise of stock acquisition right

Unrealized gain by dispose of treasury stock

Deduct:

Capital surplus deduct (off-set with deficit)

Balance at end of the year

Variance of Land Revaluation

Balance at beginning of the year

Add:

Land revaluation

Reversal of land revaluation

Other

Deduct:

Transfer to retained earnings

Others

Balance at end of the year

Accumulated Deficit:

Balance at beginning of the year

Add:

Reduction of capital

Reduction of capital reserve

Transfer from variance of land revaluation

Net income

Other

Deduct:

Net loss

Other

Balance at end of the year

See accompanying notes to consolidated financial statements.

¥ 90,329

5,045

50,000

—

—

(89,829)

¥ 55,545

¥ 101,741

4,954

50,000

—

—

(24,846)

¥ 131,850

¥ 91,287

—

—

—

(1,222)

—

¥ 90,064

¥ (213,562)

89,829

24,846

1,268

—

47

(144,301)

(673)

¥ (242,546)

¥ 55,545

—

—

12,019

—

—

¥ 67,564

¥131,850

—

—

11,980

—

(76,369)

¥ 67,461

¥ 90,064

—

19

401

—

—

¥ 90,485

¥(242,546)

—

76,369

(19)

54,713

550

—

(126)

¥ (111,058)

$ 629,150

—

—

233,292

(558,711)

—

$ 303,732

$ 628,192

—

—

232,299

255

(465,592)

$ 395,155

$ 842,590

—

—

—

(117,007)

(1,201)

$ 724,381

$(1,034,161)

—

465,592

117,007

559,058

—

—

(10,088)

$ 97,408

¥ 67,564

—

—

25,053

(60,000)

—

¥ 32,617

¥ 67,461

—

—

24,946

27

(50,000)

¥ 42,435

¥ 90,485

—

—

—

(12,565)

(129)

¥ 77,791

¥ (111,058)

—

50,000

12,565

60,037

—

—

(1,083)

¥ 10,460

24

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

Millions of yenThousands ofU.S. dollars

2005 2004 2003 2005Cash Flows from Operating Activities

Net income (loss) before income taxes and minority interests

Depreciation and amortization

Equity in loss of unconsolidated subsidiaries and affiliates

Loss on revaluation of investments

Provision for retirement benefits, less payments

Provision for allowance for product warranty

Provision for allowance for bonus

Provision for allowance for doubtful assets

Interest and dividend income

Interest expenses

Gain on disposal of property assets

Loss on disposal of property assets

Loss on investment for affiliated company restructuring

Gain on sales of securities

Other extraordinary loss

Decrease (increase) in receivable

Decrease (increase) in inventories

Decrease (increase) in other current assets

Increase (decrease) in notes and accounts payable

Increase (decrease) in accrued expenses and taxes

Increase (decrease) in deposit received

Increase (decrease) in other liabilities

Others

Cash received from interest and dividends

Cash paid for interest

Cash paid for income taxes

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities

Payments for purchase of securities

Proceeds from sales of securities

Payments for property, plant and equipment

Proceeds from sales of property, plant and equipment

Payments for long-term loans receivable

Collection of long-term loans receivable

Increase (decrease) in short-term loans receivable

Increase (decrease) in finance receivable of overseas subsidiary

Increase (decrease) in fixed deposits

Others

Net Cash Used in Investing Activities

Cash Flows from Financing Activities

Issuance of common stock

Increase (decrease) in short-term debt

Increase (decrease) in commercial paper

Proceeds from long-term debt

Payments of long-term debt

Payments (issuance) of bonds

Proceeds from bonds with warrant attached

Decrease of preferred stock

Others

Net Cash Used in Financing Activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of the Year

Increase (Decrease) in Cash and Cash Equivalents

from the Addition or Exclusion of Consolidated Companies

Cash and Cash Equivalents at End of the Year (Notes 2)

Consolidated Statements of Cash Flows (For the years ended March 31, 2005, 2004 and 2003)

See accompanying notes to consolidated financial statements.

$ 640,352

253,011

(147,235)

—

(20,572)

(10,226)

9,615

77,865

(27,961)

117,001

(29,906)

145,163

—

(49,359)

13,127

(293,015)

(82,285)

(23,317)

165,024

119,579

(13,493)

(20,895)

(17,171)

28,978

(116,506)

(107,558)

610,215

(20,527)

105,404

(415,731)

157,052

(38,233)

46,149

12,004

3,690

65,614

11,984

(72,593)

—

(822,932)

(16,761)

2,568,109

(2,323,719)

(21,882)

931,185

(558,711)

(805)

(245,517)

(2,389)

289,714

955,204

14,529

$ 1,259,449

¥ (111,527)

43,387

726

5,088

(40,150)

1,263

(3,307)

2,999

(2,724)

18,026

(3,838)

4,343

72,795

(8,060)

—

8,313

29,163

18,130

29,325

(3,004)

(10,380)

17,507

1,437

3,650

(18,466)

(4,702)

49,997

(50,247)

16,934

(34,703)

9,284

(8,735)

16,600

(245)

43,376

(6,489)

(2,281)

(16,506)

9,999

(40,088)

—

136,453

(103,368)

(53,000)

—

—

(25)

(50,029)

(2,752)

(19,291)

72,284

(42)

¥ 52,951

¥ 55,357

27,401

(10,362)

—

2,591

648

2,394

(5,245)

(2,370)

13,116

(2,893)

10,758

241

(3,524)

1,186

(17,293)

(6,852)

9,622

26,724

(4,359)

(2,127)

4,010

(441)

2,646

(13,105)

(2,831)

85,292

(3,672)

11,333

(30,394)

15,752

(4,805)

3,905

(1,833)

3,023

301

721

(5,668)

—

(49,074)

1,800

78,655

(76,834)

(15,500)

30,000

—

1,956

(28,997)

(1,061)

49,564

52,951

63

¥ 102,579

¥ 68,767

27,170

(15,811)

—

(2,209)

(1,098)

1,032

8,361

(3,002)

12,564

(3,211)

15,589

—

(5,300)

1,409

(31,466)

(8,836)

(2,504)

17,721

12,841

(1,449)

(2,243)

(1,844)

3,112

(12,511)

(11,550)

65,531

(2,204)

11,319

(44,645)

16,865

(4,105)

4,955

1,289

396

7,046

1,286

(7,795)

—

(88,374)

(1,800)

275,789

(249,544)

(2,350)

100,000

(60,000)

(86)

(26,366)

(256)

31,112

102,579

1,560

¥ 135,252

25

Isuzu Motors Limited Annual Report 2005

Notes to Consolidated Financial Statements

1. Basis of Presenting The Financial StatementsThe accompanying consolidated financial statements of Isuzu Motors

Limited (“the Company”) and consolidated subsidiaries are prepared

on the basis of accounting principles generally accepted in Japan,

which are different in certain respects as to application and disclo-

sure requirement of International Financial Reporting Standards, and

are compiled from the consolidated financial statements prepared

by the Company as required by the Securities and Exchange Law of

Japan. In addition, the notes to the consolidated financial statements

include information which is not required under accounting princi-

ples generally accepted in Japan but is presented herein as additional

information.

In order to facilitate the understanding of readers outside Japan,

certain reclassifications have been made to the consolidated financial

statements prepared for domestic purposes and relevant notes and

statements of stockholders’ equity and statements of cash flows have

been added.

The yen amounts are rounded down in millions. Therefore, total

or subtotal amounts do not correspond with the aggregation of such

account balances.

U.S. dollar amounts have been translated from Japanese yen for

convenience only at the rate of ¥107.39=US$1, the approximate

exchange rate prevailing on the Tokyo Foreign Exchange Market on

March 31, 2005. The translations should not be construed as a rep-

resentation that Japanese yen have been or could be converted into

U.S. dollars at that rate. The U.S. dollar amounts are then rounded

down in thousands.

Certain reclassifications have been made in the 2004 and 2003

financial statements to conform to the presentation for 2005.

2. Summary of Significant Accounting Policies

a) Consolidation The consolidated financial statements include the accounts of the

Company and significant subsidiaries. All significant inter-company

balances and transactions have been eliminated in consolidation.

Investments in main unconsolidated subsidiary and significant affili-

ated companies (15% to 50% owned) are accounted for by the equity

method.

The differences at the time of acquisition between the cost and un-

derlying net equity of investments in consolidated subsidiaries and in

unconsolidated subsidiaries and affiliated companies accounted for

under the equity method are, as a rule, amortized over periods of five

years after appropriate adjustments.

b) Foreign Currency TranslationThe Company has adopted the Financial Accounting Standard for

Foreign Currency Transactions in Japan effective from April 1, 2000.

Based on the accounting principle, foreign currency transaction

adjustments are recorded in ”Equity” or ”Minority Interest”.

c) SecuritiesThe accounting standard for financial instruments requires that secu-

rities be classified into three categories: trading, held-to-maturity or

other securities.

Marketable securities classified as other securities are carried at fair

value with changes in unrealized holding gain or loss, net of the ap-

plicable income taxes, included directly in stockholders’ equity. Non-

marketable securities classified as other securities are carried at cost.

Cost of securities sold is determined by the moving average method

d) Inventories Inventories of the Company are valued at cost using the periodic av-

erage method. Inventories of consolidated subsidiaries are principally

valued at cost using the specific identification method.

e) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of

property, plant and equipment is principally computed by the straight-

line method over the applicable useful lives.

f) Software costsSoftware used by the Company and its consolidated subsidiaries is

depreciated using the straight-line method, based on the useful

life as determined by the Company and its consolidated subsidiaries

(generally 5 years).

g) LeasesFinance lease transactions, except for those which meet the condi-

tions that the ownership of the lease assets is substantially transferred

to the lessee, are accounted for on a basis similar to ordinary rental

transactions.

h) Employees’ Retirement BenefitsEmployees’ retirement benefits covering all employees are provided

through an unfunded lump-sum benefit plan and a funded pension

plan. Under the plans, eligible employees are entitled, under most

circumstances, to severance payments based on compensation at the

time of severance and years of service.

The Company has adopted the Financial Accounting Standard for

retirement benefits in Japan. In accordance with this standard, ac-

crued employees’ retirement benefits have been provided mainly at an

amount calculated based on the retirement benefit obligation and the

fair value of the pension plan assets adjusted for unrecognized actu-

arial gain or loss.

i) Income TaxesIncome taxes are accounted for on an accrual basis. Deferred tax

assets and liabilities are recognized for the future tax consequences

attributable to differences between the financial statement carrying

amounts of existing assets and liabilities and their respective tax bas-

es. Deferred tax assets and liabilities are measured using enacted tax

rates expected to apply to taxable income in the years in which those

26

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

Thousands ofMillions of yen U.S. dollars

Net Income

Less: Components not pertaining to common shareholders;Bonuses to directors and corporate auditors

Dividend to preferred stock (Class II excluded)

Net income pertaining to common stock

Average outstanding shares:

Common stock (share):

Class IV preferred stock (share):

Thousands of Millions of yen U.S. dollars

Cash and time deposits on the consolidated balance sheet

Time deposits with original maturities over three month at the time of purchase

Cash and cash equivalents on the statement of cash flows

Millions of yen Thousands of U.S. dollars

Acquisition Carrying Unrealized Acquisition Carrying Unrealized costs value gain (loss) costs value gain (loss)

Unrealized gain:

Stocks

Bonds:

Corporate bonds

Investment trusts

Total

Unrealized loss:

Stocks:

Total

3. InvestmentsFair Value of Securities of other securities as of March 31, 2005 were as follows:

Proceeds from sales of securities classified as other securities amounted to ¥6,026 million ($56,121 thousands) with an aggregate gain on sales of ¥3,704

million ($34,493 thousands) and an aggregate loss on sales of ¥507 million ($4,726 thousands) for the year ended March 31, 2005.

$ 112,814

$ 0

$ 350

$ 113,165

$ (3,695)

$ (3,695)

$ 225,111

$ 28

$ 909

$ 226,049

$ 21,293

$ 21,293

$ 112,296

$ 27

$ 559

$ 112,884

$ 24,988

$ 24,988

¥ 12,115

¥ 0

¥ 37

¥ 12,152

¥ (396)

¥ (396)

¥ 24,174

¥ 3

¥ 97

¥ 24,275

¥ 2,286

¥ 2,286

¥ 12,059

¥ 3

¥ 60

¥ 12,122

¥ 2,683

¥ 2,683

$ 1,297,676

(38,277)

$ 1,259,449

¥ 139,357

(4,105)

¥ 135,252

$ 559,058

142

5,419

553,496

953,762,418

95,693,780

¥ 60,037

15

582

59,439

953,762,418

95,693,780

temporary differences are expected to be recovered or settled. The

effect of deferred tax assets and liabilities of a change in tax rate are

recognized in income in the period that includes the enacted date.

j) Net Income per ShareNet income per share of common stock is based upon the weighted

average number of shares of common stock outstanding during each

year. Under the revised financial statements regulations in Japan, the

weighted average number of shares is calculated based on the num-

ber of issued shares less the number of treasury stocks from the fiscal

year ended March 31, 2002.

Effective from the fiscal year ended March 31, 2003, the Company

applied early adoption of the Financial Accounting Standard No. 2

“Financial Accounting Standard for Earnings per Share” and the

Financial Accounting Standard Implementation Guidance No. 4

“Implementation Guidance for Accounting Standard for Earnings

per Share” issued by the Accounting Standards Board of Japan on

September 25, 2002.

Basis for the calculation of net income per share at the year ended

March 31,2005 is as follows:

k) Appropriation of Retained Earning Appropriations of retained earnings are recorded in the financial year

in which the appropriation is approved by the Board of Directors or

shareholders.

l) Cash and Cash Equivalents For the purpose of the statement of cash flows, the Company consid-

ers all highly liquid investments with a maturity of three months or

less to be cash equivalents.

Reconciliation for cash and cash equivalents at end of year on the

statement of cash flows for the years ended March 31, 2005 is as

follows:

27

Isuzu Motors Limited Annual Report 2005

Non-marketable securities classified as other securities at March 31, 2005 amounted to ¥2,239 million ($20,856 thousands).

The redemption schedule for bonds with maturity dates at March 31, 2005 was summarized as follows:

Thousands ofMillions of yen U.S. dollars

1.59% straight bonds due 2010

3.3% Guaranteed debentures of Isuzu Motors Co.,

(Thailand) Ltd. No.1/2547 due 2007

Bonds with warrant attached (*)

Loans

Less: current portion

—$28—¥3

$ 93,118

24,535

521,463

2,682,225

$ 550,216

$ 2,771,127

¥ 10,000

2,634

56,000

288,044

¥ 59,087

¥ 297,591

The Company issued 2nd Series Unsecured Convertible Bonds in fiscal

year 2005. The Company has redeemed all of these bonds before ma-

turity in June 17, 2005.

The annual maturities of long-term debt at March 31, 2005 are as

follows:

The assets pledged as collateral for certain loans and other liabilities

at March 31, 2005 were as follows:

5. Retirement Benefits Obligation and Pension Plan(1) Retirement benefits obligation as of March 31, 2005

From September 1, 2003, The Company amended the Employee

Pension Fund to establish the cash balance pension plan.

(2) Retirement benefit cost for the year ended March 31, 2005.

(3) Actuarial assumptions used to determine costs and obligations for

retirement.

Thousands ofPlanned maturity date Millions of yen U.S. dollars

Due after 1 year within 2 years

Due after 2 years within 3 years

Due after 3 years within 4 years

Thereafter

Total

$ 1,006,920

468,064

382,188

913,954

$ 2,771,127

¥ 108,133

50,265

41,043

98,149

¥ 297,591

Thousands ofMillions of yen U.S. dollars

Cash and time deposits

Notes and accounts receivable

Building and structures

Machinery and equipment

Land

Securities

Others

$ 23,889

294,741

644,232

385,039

2,031,762

22,213

6,973

¥ 2,565

31,652

69,184

41,349

218,191

2,385

748

Thousands ofMillions of yen U.S. dollars

Service cost

Interest cost on projected benefit obligation

Expected return on plan assets

Amortization of actuarial net loss (gain)

Amortization of prior service cost

Net periodic pension cost

Thousands ofMillions of yen U.S. dollars

Projected benefits obligation

at end of the year

Fair value of plan assets

Accrued retirement and

severance benefits on balance sheets

Net

Unrecognized actuarial net loss

¥ (112,300)

27,161

60,057

¥ (25,081)

¥ (25,081)

$(1,045,723)

252,922

559,243

$ (233,557)

$ (233,557)

$ 17,980

19,609

(3,077)

59,867

(16,104)

$ 78,274

¥ 1,930

2,105

(330)

6,429

(1,729)

¥ 8,405

2005

Discount rate

Expected rate of return on plan assets

Recognition period of prior service cost

Amortization period of actuarial net loss (gain)

Amortization period of net obligationarising from accounting changes

2.3%

1.5~2.5%

1 year

10 years

1 year

4. Long-Term DebtLong-term debt at March 31, 2005 were as follows:

Millions of yen Thousands of U.S. dollars

Due in one Due in one year or less Due after one year year or less Due after one year

Corporate bonds

28

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

6. Income TaxesAccrued income taxes in the balance sheets include corporation taxes,

inhabitant taxes and enterprise taxes.

Income taxes in the statements of operations include corporation

taxes and inhabitant taxes and enterprise taxes.

The significant components of the Company's deferred tax assets and

liabilities as of March 31, 2005 were as follows:

A reconciliation between the normal effective statutory tax rate and

the actual effective tax rates reflected in the accompanying consoli-

dated statements of operations for the years ended March 31, 2005

was as follows:

Thousands ofMillions of yen U.S. dollars

Deferred tax assets:

Retirement benefits

Loss from revaluation of securities and

allowance for doubtful accounts

Accrued expenses

Bonus payment reserve

Inventory write down

Loss carried forward

Unrealized gain

Other

Valuation allowance

Deferred tax liabilities

Reserve for deferred income tax of fixed assets

Depreciation adjustment of foreign subsidiaries

Other

Total deferred tax assets

$ 172,116

780,602

87,497

37,280

9,974

215,047

100,454

381,767

(1,398,752)

(2,245)

(33,869)

(4,801)

$ 345,072

¥ 18,483

83,828

9,396

4,003

1,071

23,093

10,787

40,997

(150,212)

(241)

(3,637)

(515)

¥ 37,057

Deferred tax liabilities:

Reserve for deferred income tax of fixed assets

Unrealized hiding gain on securities

Other

Total deferred tax liabilities

6,797

29,757

7,147

$ 43,704

730

3,195

767

¥ 4,693

2005

Normal effective statutory tax rate

Net valuation allowance

Different tax rate applied to foreign subsidiaries

Retained earnings of foreign subsidiaries

Carry forward deficit of consolidated subsidiaries

Equity in earnings of unconsolidated

subsidiaries and affiliates

Foreign tax credit

Others,net

Actual effective tax rate

7. Shareholders’ EquityThe Code provides that an amount equal to at least 10% of the

amounts to be disbursed as distributions of earnings be appropriated

to the legal reserve until the sum of the legal reserve and additional

paid-in capital equals 25% of the common stock account. The Code

also stipulates that, to the extent that the sum of the additional paid-

in capital account and the legal reserve exceeds 25% of the common

stock account, the amount of any such excess is available for appro-

priation by resolution of the shareholders.

The legal reserves of the consolidated subsidiaries are included

in retained earnings in the accompanying consolidated financial

statements.

The Company’s capital surplus was off-setted with deficit in the

amount of ¥50,000 millions ($465,592 thousands) based on the

approval by the stockholders’ meeting held on December 22, 2004.

The Company issued new common stock due to the exercise of

stock acquisition right. As the effect of the issuance, the Company’s

common stock increased by ¥25,053 millions, the Company’s capi-

tal surplus increased by ¥24,946 millions ($232,299 thousands), and

the Company’s bonds with warrant attached decreased by ¥50,000

million ($462,292 thousands) .

The Company retired Class-II preferred stock with payment to the

shareholders of Class-II preferred stock based on the approval by the

stock holders’ meeting held on December 22, 2004. As the effect of

the retirement of preferred stock, the Company’s common stock and

preferred stock decreased by ¥60,000 millions ($558,711 thousands).

8. Preferred StockThe Company issued the preferred stock (Class I, Class II, Class III

and Class IV) in the fiscal year 2003. The Company has retired Class-II

preferred stock in fiscal year 2005. Interim dividend shall not be paid

to preferred shareholders or to preferentially registered pledges.

When the amount of dividend to be paid to the preferred sharehold-

ers or preferentially registered pledges in a given business year does

not reach the amount of the preferred dividend, the shortfall will not

be carried over to the next business year for accumulation.

When the residual property of the Company is to be distributed,

¥800 per share of the preferred stocks shall be paid to the preferred

shareholders or to the preferentially registered pledges before the ordi-

nary shareholders or the ordinarily registered pledges.

No other residual property than the above shall not be distributed to

the preferred shareholders or to the preferentially registered pledges.

The Company can always purchase preferred stocks and cancel the

stocks at the purchased price by a profit distributed to shareholders.

The preferred shareholders shall not have a voting right at the General

Meeting of Shareholders.

The Company shall not make the consolidation or division of pre-

ferred stocks unless otherwise stipulated by law.

The Company shall not give preemptive rights, stock acquisition

rights or subscription right of bond with stock acquisition rights to the

preferred shareholders.

Payment of dividends and distribution of residual property to each

40.0%

(37.3)

(5.6)

7.3

5.8

(9.2)

5.6

2.5

9.1

29

Isuzu Motors Limited Annual Report 2005

class of the preferred stock shall be made according to the same order

of priority.

a) Outline of the Issue of Class-I Preferred Stock(1) Preferred Dividend

Class-I preferred dividend shall be calculated according to the follow-

ing formula. Class-I preferred dividend shall be calculated to four plac-

es of decimals of less than yen and rounded off at the fourth place of

decimals. However, when the calculation result exceeads ¥80, Class-I

preferred dividend will be set at ¥80.

Class-I preferred dividend=¥800× (Japanese Yen TIBOR+0.750%)

Any portion of dividend which exceeds the amount of the Class-I

preferred stocks shall not be paid to Class-I preferred shareholders

and Class-I preferentially registered pledges.

(2) Conversion Contract Right

(i) Period for Claiming Conversion

Period for claiming the conversion of the Class-I preferred stocks shall

be from October 1, 2006 to September 30, 2022.

(ii) Conditions for Conversion

The Class-I preferred stocks can be converted to the common stocks

of the Company at the per-share converting values specified below

from (a) to (c).

(a) Initial Conversion Price = ¥54

(b) Revision of Conversion Price

Conversion price is revised to the average price on October 1 every

year from October 1, 2007 to September 30, 2022 (hereinafter re-

ferred to as the date of revision of conversion price respectively) when

the average price (excluding days without closing price) of daily clos-

ing prices (including quoted price) in regular transactions of common

stocks of the Company at the Tokyo Stock Exchange the Tokyo Stock

Exchange. during 30 business days starting from 45th business day

preceding the date of revision of conversion price (hereinafter referred

to as actual value calculation period respectively) is below the initial

conversion price (revised conversion price shall be calculated to the

first decimal point and then rounded up. In addition, if during the ac-

tual value calculation period, a revision specified in (c) below has to be

necessary, the average price shall be revised to an amount judged ap-

propriate by the Board of Directors in accordance with (c). However,

when after calculation, the revised conversion price is below the price

equal to 70% of the initial conversion price (calculated to the first

decimal point and then rounded up, hereinafter referred to as floor

conversion price and revised according to (c).), the floor conversion

price shall be treated as the revised conversion price.

(c) Adjustment of Conversion Price

After the issue of Class-I preferred stocks, if any of the followings

applies, the conversion price shall be adjusted by the formula below

(hereinafter referred to as formula for the adjustment of conversion

price). In this formula, figures shall be calculated to the first decimal

point and then rounded up.

(3) Mandatory Conversion

The Class-I preferred stocks which are not requested for conver-

sion during the period in which a request for conversion is possible

shall become common stocks on the day determined by the Board

of Directors’ Meeting which is held on the next day of the last day of

the said period (hereinafter referred to as the base date of Mandatory

conversion) and the number of the common stocks is obtained from

dividing the amount equal to the amount paid per stock of the Class-

I preferred stocks by the average price (calculated to the first decimal

point and then rounded up) of the daily closing price (including quot-

No. of issued common stocksNo. of new common stocks Amount paid per new stock

Pre-adjust conver. price Market value per stock

No. of issued common stocks No. of new common stocks

Adj. conver. pricex

+x

+

=

(iii)The Number of Common Stocks to be issued through Conversion

The number of common stocks of the Company to be issued through the conversion of the Class-I preferred stocks shall be as follows.

When fractions less than 1 are produced in calculating the number of common stocks to be issued, they shall be dropped.

Total Amount of Issue Price of Class- I Preferred Stocks submitted by

No. of common stocks Shareholders for asking Conversionissued thru conversion Conversion Price

=

ed price) in regular transactions of common stocks of the Company at

the Tokyo Stock Exchange the Tokyo Stock Exchange. during 30 busi-

ness days (excluding days without closing price) starting from the 45th

business day preceding the base date of Mandatory conversion.

When the average price is lower than the floor conversion price,

the Class-I preferred stocks shall become common stocks whose num-

ber is obtained from dividing the amount equal to the amount paid

per stock of the Class-I preferred stock by the floor conversion price.

Also, when the average price is more than the maximum conversion

30

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

price, they shall become common stocks whose number is obtained

from dividing the amount equal to the amount paid per stock of the

Class-1 preferred stocks by the maximum conversion price.

The maximum conversion price is equal to the initial conversion

price (subject to “Adjustment of Conversion Price” described the above

(2)(ii)(c).

When fractions less than 1 are produced in calculating the above

number of common stocks, they shall be treated according to the

treatment of the reverse split of stocks stipulated in the Commercial

Law.

b) Outline of the Issue of Class-III Preferred Stock(1) Preferred Dividend

Class-III preferred dividend shall be calculated according to the fol-

lowing formula. Class-III preferred dividend shall be calculated to four

places of decimals of less than yen and rounded off at the fourth

place of decimals. However, when the calculation result exceeds ¥80,

Class-III preferred dividend will be set at ¥80.

Class-III preferred dividend=¥800× (Japanese Yen TIBOR+1.500%)

Any portion of dividend which exceeds the amount of the Class-III

preferred stocks shall not be paid to Class-III preferred shareholders

and Class-III preferentially registered pledges.

(2) Conversion Contract Right

(i) Period for Claiming Conversion

Period for claiming the conversion of the Class-III preferred stocks

shall be from October 1, 2010 to September 30, 2027.

(ii) Conditions for Conversion

The Class-III preferred stocks can be converted to the common stocks

of the Company at the per-share converting values specified below

from (a) to (c).

(a) Initial Conversion Price

The average price of daily closing prices (including quoted price) in

regular transactions of common stocks of the Company at the Tokyo

Stock Exchange. during 30 business days (excluding days without clos-

ing price) starting from 45th business day preceding the first day of

period for claiming conversion (calculated to the first decimal point and

then rounded up the first decimal point and then rounded up.)

(b) Revision of Conversion Price

Conversion price is revised to the average price (excluding days with-

out closing price) of daily closing prices (including quoted price) in

regular transactions of common stocks of the Company at the Tokyo

Stock Exchange during 30 business days starting from 45th business

day preceding the date of revision of conversion price (hereinafter re-

ferred to as actual value calculation period respectively) on October 1

every year from October 1, 2011 to September 30, 2027 (hereinafter

referred to as the date of revision of conversion price respectively).

(Revised conversion price shall be calculated to the first decimal point

and then rounded up. In addition, if during the actual value calcula-

tion period, a revision specified in (c) below becomes necessary, the

average price shall be revised to an amount judged appropriate by the

Board of Directors in accordance with (c).). However, after the above

calculation, when the revised conversion price is below the price equal

to 50% of the initial conversion price (calculated to the first decimal

point and then rounded up, hereinafter referred to as floor conversion

price and revised according to (c).), the floor conversion price shall be

treated as the revised conversion price. Also after the above calcula-

tion, when the revised conversion price is above the price equal to

200% of the initial conversion price (calculated to the first decimal

point and then rounded up, hereinafter referred to as the maximum

conversion price and revised according to (c).), the maximum conver-

sion price shall be treated as the revised conversion price.

(c) Adjustment of Conversion Price

After the issue of Class-III preferred stocks, if any of the followings

applies, the conversion price shall be adjusted by the formula below

(hereinafter referred to as formula for the adjustment of conversion

price). In this formula, figures shall be calculated to the first decimal

point and then rounded up.

(iii)The Number of Common Stocks to be issued through Conversion

The number of common stocks of the Company to be issued through the conversion of the Class-III preferred stocks shall be as follows.

No. of issued common stocks No. of new common stocks Amount paid per new stock

Pre-adjust conver. price Market value per stock

No. of issued common stocks No. of new common stocks

Adj. conver. pricex

+x

+

=

When fractions less than 1 are produced in calculating the number of common stocks to be issued, they shall be dropped.

Total Amount of Issue Price of Class-III Preferred Stocks submitted by

No. of common stocks Shareholders for asking Conversionissued thru conversion Conversion Price

=

31

Isuzu Motors Limited Annual Report 2005

(3) Mandatory Conversion

The Class-III preferred stocks which are not requested for conver-

sion during the period in which a request for conversion is possible

shall become common stocks on the day determined by the Board

of Directors’ Meeting which is held on the next day of the last day of

the said period (hereinafter referred to as the base date of Mandatory

conversion) and the number of the common stocks is obtained from

dividing the amount equal to the amount paid per stock of the Class-

III preferred stocks by the average price (calculated to the first decimal

point and then rounded up) of the daily closing price (including quot-

ed price) in regular transactions of common stocks of the Company

at the Tokyo Stock Exchange. during 30 business days (excluding days

without closing price) starting from the 45th business day preceding

the base date of Mandatory conversion.

When the average price is lower than the floor conversion price, the

Class-III preferred stocks shall become common stocks whose num-

ber is obtained from dividing the amount equal to the amount paid

per stock of the Class-III preferred stock by the floor conversion price.

Also, when the average price is more than the maximum conversion

price, they shall become common stocks whose number is obtained

from dividing the amount equal to the amount paid per stock of the

Class-III preferred stocks by the maximum conversion price.

When fractions less than 1 are produced in calculating the above

number of common stocks, they shall be treated according to the

treatment of the reverse split of stocks stipulated in the Commercial

Law.

c) Outline of the Issue of Class-IV Preferred Stock(1) Preferred Dividend

Amount of preferred dividend per share (hereinafter referred to as

“Class-IV preferred dividend”) shall be calculated according to the

following formula. Class-IV preferred dividend shall be calculated to

four places of decimals of less than yen and rounded off at the fourth

place of decimals. However, when the calculation result exceeds ¥80,

Class-IV preferred dividend will be set at ¥80.

Class-IV preferred dividend=¥800× (Japanese Yen TIBOR+2.000%)

When there is a residual profit after the Class-III preferred dividend

is paid to the Class-IV preferred stocks, dividend of profit can be paid

to the common stocks until it becomes equal to Class-IV preferred

dividend. Also when dividend of profit is paid concerning the residual

profit, the same amount of money per stock shall be paid to the Class-

IV preferred stocks and the common stocks.

(2) Conversion Contract Right

(i) Period for Claiming Conversion

Period for claiming the conversion of the Class-IV preferred stocks

shall be from October 1, 2012 to September 30, 2032.

(ii) Conditions for Conversion

The Class-IV preferred stocks can be converted to the common stocks

of the Company at the per-share converting values specified below

from (a) to (c).

(a) Initial Conversion Price

The average price of daily closing prices (including quoted price) in

regular transactions of common stocks of the Company at the Tokyo

Stock Exchange. during 30 business days (excluding days without clos-

ing price) starting from 45th business day preceding the first day of

period for claiming conversion (calculated to the first decimal point

and then rounded up.)

(b) Revision of Conversion Price

Conversion price is revised to the average price (excluding days with-

out closing price) of daily closing prices (including quoted price) in

regular transactions of common stocks of the Company at the Tokyo

Stock Exchange. during 30 business days starting from 45th business

day preceding the date of revision of conversion price (hereinafter re-

ferred to as actual value calculation period respectively) on October 1

every year from October 1, 2013 to September 30, 2032 (hereinafter

referred to as the date of revision of conversion price respectively).

(Revised conversion price shall be calculated to the first decimal point

and then rounded up. In addition, if during the actual value calcula-

tion period, a revision specified in (c) below becomes necessary, the

average price shall be revised to an amount judged appropriate by the

Board of Directors in accordance with (c).). However, after the above

calculation, when the revised conversion price is below the price equal

to 50% of the initial conversion price (calculated to the first decimal

point and then rounded up, hereinafter referred to as floor conversion

price and revised according to (c).), the floor conversion price shall be

treated as the revised conversion price. Also after the above calcula-

tion, when the revised conversion price is above the price equal to

200% of the initial conversion price (calculated to the first decimal

point and then rounded up, hereinafter referred to as the maximum

conversion price and revised according to (c).), the maximum conver-

sion price shall be treated as the revised conversion price.

(c) Adjustment of Conversion Price

After the issue of Class-IV preferred stocks, if any of the follow-

ings applies, the conversion price shall be adjusted by the formula

below(hereinafter referred to as formula for the adjustment of con-

version price). In this formula, figures shall be calculated to the first

decimal point and then rounded up.

Adj. conver. priceNo. of issued common stocks

No. of new common stocks Amount paid per new stock

Pre-adjust conver. price Market value per stock

No. of issued common stocks No. of new common stocks

x+

x

+

=

32

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

(3) Mandatory Conversion

The Class-IV preferred stocks which are not requested for conver-

sion during the period in which a request for conversion is possible

shall become common stocks on the day determined by the Board

of Directors’ Meeting which is held on the next day of the last day of

the said period (hereinafter referred to as the base date of Mandatory

conversion) and the number of the common stocks is obtained from

dividing the amount equal to the amount paid per stock of the Class-

IV preferred stocks by the average price (calculated to the first decimal

point and then rounded up) of the daily closing price (including quot-

ed price) in regular transactions of common stocks of the Company

at the Tokyo Stock Exchange. during 30 business days (excluding days

without closing price) starting from the 45th business day preceding

the base date of Mandatory conversion.

When the average price is lower than the floor conversion price, the

Class-IV preferred stocks shall become common stocks whose num-

ber is obtained from dividing the amount equal to the amount paid

per stock of the Class-IV preferred stock by the floor conversion price.

Also, when the average price is more than the maximum conversion

price, they shall become common stocks whose number is obtained

from dividing the amount equal to the amount paid per stock of the

Class-IV preferred stocks by the maximum conversion price.

When fractions less than 1 are produced in calculating the above

number of common stocks, they shall be treated according to the

treatment of the reverse split of stocks stipulated in the Commercial

Law.

(iii) The Number of Common Stocks to be issued through Conversion

The number of common stocks of the Company to be issued through the conversion of the Class-II preferred stocks shall be as follows.

When fractions less than 1 are produced in calculating the number of common stocks to be issued, they shall be dropped.

Total Amount of Issue Price of Class- IV Preferred Stocks submitted by

No. of common stocks Shareholders for asking Conversionissued thru conversion Conversion Price

=

9. Land RevaluationIn accordance with the Law concerning Revaluation of Land en-

acted on 31 March, 1999, the land used for business owned by the

Company was revalued, and the unrealized gain on the revalua-

tion of land, net of deferred tax, was reported as “Variance of Land

Revaluation” within Stockholders’ Equity, and the relevant deferred

tax was included in Liabilities as “Deferred Tax Liabilities related to

Land Revaluation” for the fiscal year ended 31 March, 2005.

In accordance with the Law concerning Revaluation of Land enacted

on March31, 1998, the land used for business owned by some of the

Company’s non-consolidated subsidiaries and affiliates which were ac-

counted for by the equity method were revalued.

The method of revaluation is as follows:

Under article 3-3 of the enforcement ordinance for the law, the land

price for the revaluation is determined based on the official notice

prices assessed and published by the National Land Agency of Japan,

after appropriate adjustments for the shape of land and the timing of

the assessment on 31 March, 1999.

10. Contingent LiabilitiesContingent liabilities at March 31, 2005 were as follows:

Thousands ofMillions of yen U.S. dollars

Guarantees of bank loans

Export bills discounted

Notes discounted

Notes endorsed

$ 89,724

16,098

31,041

250

¥ 9,635

1,728

3,333

26

33

Isuzu Motors Limited Annual Report 2005

Millions of yen Thousands of U.S. dollars

2005 2004 2005

Acquisition Costs

Accumulated Depreciation

Net Balance

(ii) Future payment obligations of finance lease expenses as of March 31, 2005 and 2004 are as follows:

Millions of yen Thousands of U.S. dollars

2005 2004 2005

Portion due within one year

Thereafter

Lease expense paid

Amounts equivalent to interest expenses are calculated by the interest method based on an excess of the aggregate sum of lease payments over

amounts equivalent to acquisition costs.

(2) Operating lease were as follows.

a) As a lesseeFuture payment obligations of operating lease expenses as of March 31, 2005 and 2004 are as follows:

Millions of yen Thousands of U.S. dollars

2005 2004 2005

Portion due within one year

Thereafter

Millions of yen Thousands of U.S. dollars

2005 2004 2005

Portion due within one year

Thereafter

b) As a lessorFuture receivable income of operating lease commitment as of March 31, 2005 and 2004 are as follows:

$ 390,267

226,970

163,297

¥ 50,437

30,030

20,406

¥ 41,910

24,374

17,536

$ 58,842

117,273

79,063

¥ 7,632

14,250

10,597

¥ 6,319

12,593

8,490

$ 6,311

11,079

¥ 570

1,669

¥ 677

1,189

$ 180

270

¥ 19

47

¥ 19

29

11. Lease Transactions(1) Finance lease transactions, except for those which meet the conditions that the ownership of the leased assets is substantially transferred to

the lessee, were as follows.

a) As a lessee

(i) Amounts equivalent to acquisition costs, accumulated depreciation and net balance as of March 31, 2005 and 2004 concerning the finance

lease assets:

b) The Company issued new common stock (67,669,954 shares) due

to the exercise of stock acquisition right from April 1 to June 6. As

the effect of the issuance, the Company’s common stock increased by

¥8,027 milliom ($74,746 thousands), the Company’s capital surplus

increased by ¥7,972 million ($74,242 thousands) and bonds with war-

rant attached decreased from ¥56,000million ($521,463 thousands)

to ¥40,000 million ($372,474 thousands).

The Company redeemed these bonds with warrant attached

(amount of ¥40,000 million ($372,474 thousands)) in June 17, 2005.

Year-end cash dividends

Preferred Stock (Class I) (¥6.912=U.S.$0.064 per share)

Preferred Stock (Class III) (¥12.912=U.S.$0.120 per share)

Preferred Stock (Class IV) (¥16.912=U.S.$0.157 per share)

Common Stock (¥1.500=U.S.$0.013 per share)

$ 2,413

3,005

3,937

14,985

¥ 259

322

422

1,609

Thousands ofU.S. dollars

Millonsof yen

12. SUBSEQUENT EVENTSa) The following appropriations of retained earnings of the Company

were approved at the shareholders’ meeting held on June 29, 2005:

34

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

12. Segment Information(1) The business segment information for the Company and its consolidated subsidiaries for the years ended March 31, 2005 and 2004

As net sales, operaring income and total assets from the automotive business of the Company and its consolidated subsidiaries constituted more

than 90% of the consolidated totals for the year ended March 31, 2005 and 2004, the business segment information for fiscal 2005 and 2004 is

not shown.

(2) The geographical segment information for the Company and its consolidated subsidiaries for the years ended March 31, 2005 and 2004 were

as follows:

Japan North America Asia Other Total Eliminations Consolidated

Year ended March 31, 2005 Millions of yen

Sales to third parties

Interarea sales and transfers

Total sales

Operating expenses

Operating income (loss)

Total assets

Thousands of U.S. dollars

Sales to third parties

Interarea sales and transfers

Total sales

Operating expenses

Operating income (loss)

Total assets

195,917

4,970

200,888

201,117

(229)

56,879

1,824,353

46,288

1,870,642

1,872,777

(2,135)

529,650

292,903

3,694

296,598

282,516

14,082

125,541

2,727,479

34,404

2,761,883

2,630,751

131,131

1,169,023

33,016

176

33,192

31,870

1,322

14,426

307,443

1,643

309,087

296,775

12,311

134,338

Japan North America Asia Other Total Eliminations Consolidated

Year ended March 31, 2004 Millions of yen

Sales to third parties

Interarea sales and transfers

Total sales

Operating expenses

Operating income (loss)

Total assets

1,430,339

—

1,430,339

1,345,848

84,490

1,077,816

973,239

91,753

1,064,992

987,791

77,201

958,803

—

(106,079)

(106,079)

(106,383)

304

(20,919)

1,430,339

106,079

1,536,418

1,452,232

84,186

1,098,736

25,887

73

25,960

24,561

1,399

11,670

207,285

2,793

210,078

203,803

6,274

71,045

223,928

11,458

235,386

236,075

(688)

57,216

971,729

116,132

1,087,862

1,014,931

72,931

963,719

9,048,606

1,081,412

10,130,018

9,450,893

679,124

8,974,017

1,493,567

—

1,493,567

1,406,353

87,214

1,142,580

13,907,883

—

13,907,883

13,095,754

812,128

10,639,544

1,493,567

124,974

1,618,542

1,530,436

88,106

1,160,567

13,907,883

1,163,748

15,071,631

14,251,198

820,433

10,807,030

—

(124,974)

(124,974)

(124,083)

(891)

(17,986)

—

(1,163,748)

(1,163,748)

(1,155,443)

(8,304)

(167,486)

35

Isuzu Motors Limited Annual Report 2005

North America Asia Other Total

Year ended March 31, 2005 Millions of yen

Overseas sales

Consolidated net sales

Overseas sales per consolidated net sales

Thousands of U.S. dollars

Overseas sales

Consolidated net sales

Overseas sales per consolidated net sales

North America Asia Other Total

Year ended March 31, 2004 Millions of yen

Overseas sales

Consolidated net sales

Overseas sales per consolidated net sales

(3) Overseas sales, which include export sales of the Company and its domestic consolidated subsidiaries and sales (other than export to Japan) of

the foreign consolidated subsidiaries, were as follows:

867,818

1,493,567

58.1%

8,080,995

13,907,883

58.1%

802,975

1,430,339

56.1%

231,901

—

14.3%

1,991,819

—

14.3%

251,563

—

17.6%

279,744

—

18.7%

2,604,938

—

18.7%

215,194

—

15.0%

374,172

—

25.1%

3,484,238

—

25.1%

336,217

—

23.5%

36

Isuzu Motors Limited Annual Report 2005

FINANCIAL SECTION

To The Board of Directors

Isuzu Motors Limited

We have audited the accompanying consolidated balance sheets of Isuzu Motors Limited and consolidated

subsidiaries as of March 31, 2005, 2004 and 2003, and the related consolidated statements of operations,

shareholders’ equity, and cash flows for the years then ended, all expressed in yen. These financial

statements are the responsibility of the Company's management. Our responsibility is to express an

opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the

consolidated financial position of Isuzu Motors Limited and consolidated subsidiaries at March 31, 2005,

2004 and 2003, and the consolidated results of their operations and their cash flows for the years then

ended in conformity with accounting principles generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year

ended March 31, 2005 are presented solely for convenience. Our audit also included the translation of

yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis

described in Note 1.

June 29, 2005

Tokyo, Japan

See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial

statements of Isuzu Motors Limited and consolidated subsidiaries under Japanese accounting principles and practices

Report of Independent Auditors

37

PRINCIPAL DOMESTIC SUBSIDIARIES AND AFFILIATES

Isuzu Motors Kinki Co., Ltd.

Isuzu Motors Tokai Co., Ltd.

Kanagawa Isuzu Motors Ltd.

Tokyo Isuzu Motors Ltd.

Isuzu LINEX Corporation

J-Bus Limited

Jidosha Buhin Kogyo Co., Ltd.

Automobile Foundry Co., Ltd.

TDF Corporation

Nippon Fruehauf Co., Ltd.

PRINCIPAL OVERSEASSUBSIDIARIES AND AFFILIATES

Asia

Isuzu Motors Asia Ltd. (IMA)9 Temasek Boulevard, #22-03, Suntec City Tower II, Singapore 038989Tel: 65-6339-9301

Isuzu (China) Holding Co., Ltd.Room No. 1510, Beijing Fortune Building, No.5 Dong San Huan North Road, Chao Yang District, Beijing, The People's Republic of ChinaTel: 86-10-6590-8951

Qingling Motors Co., Ltd.1, Xiexing Road, Zhong Liang Shan, Jiu Long Po District, Chongqing, The People's Republic of ChinaTel: 86-23-6526-4125

ISUZU (Shanghai) Tradetech Co., Ltd.Room A, 24F, No. 710 Dong Fang Road, Pudong New Area, Shanghai, The People's Republic of ChinaTel: 86-21-6876-2718

Guangzhou Isuzu Bus Co., Ltd.68 Yuan Gang Road Yan Ling, Guangzhou City, The People's Republic of ChinaTel: 86-20-3708-6936

Isuzu Motors Off-Highway Diesel Engine Trading (Shanghai) Co., Ltd.Rm. 3104, New Town Centre No. 83 Loushanguan Rd., Shanghai, China Tel: 021-6236-8395

Taiwan Isuzu Motors Co., Ltd. (TIM)2-2 Lane 310, Sec.2 Sha-Tien Road, Ta Tu, Taichung Hsien, Taiwan, ROCTel: 886-42-699-7600

Isuzu Philippines Corporation (IPC)114 Technology Avenue, Phase II, Laguna Technopark, Binan, Laguna 4024, PhilippinesTel: 63-2-842-0241

Isuzu Autoparts Manufacturing Corporation (IAMC)114 North Main Avenue, Phase III, Special Economic Zone, Laguna Technopark, Binan, Laguna 4024, PhilippinesTel: 63-49-541-1458

Isuzu Vietnam Co.,Ltd. (IVC)100 Quang Trung St. Ward 11, Go Vap District, Ho Chi Minh City, VietnamTel: 84-8-8959202

Isuzu Motors Co., (Thailand) Ltd. (IMCT)38 Kor. Moo9 Poochaosamingprai Road, Samrong-Tai, Phrapradaeng, Samutprakan 10130, ThailandTel: 66-2-394-2541

Isuzu Engine Manufacturing Co., (Thailand) Ltd. (IEMT)Lat Krabang Industrial Estate, Chalong-Krung Road, 122 Moo 4 Lamplatew, Lat Krabang, Bangkok 10520, ThailandTel: 66-2-326-0916~9

Thai International Die Making Co., Ltd. (TID)331-332 Bangpoo Industrial Estate, Sukhumvit Road, Amphur Muang, Samutprakan 10280, ThailandTel: 66-2-324-0511

IT Forging (Thailand) Co., Ltd. (ITF)Siam Eastern Industrial Park 60/7 Moo 3.T.Mabyangporn A. Pluakdaeng, Rayong 21140, ThailandTel: 66-38-891-380

Tri Petch Isuzu Sales Co., Ltd. (TIS)1088 Vibhavadi Rangsit Road, Ladyao Chatuchak, Bangkok 10900, ThailandTel: 66-2-966-2111~30

Isuzu Operations (Thailand) Co., Ltd. (IOT)1088 Vibhavadi Rangsit Road, Ladyao, Chatuchak, Bangkok 10900, ThailandTel: 66-2-966-2222

Isuzu Technical Center of Asia Co., Ltd. (ITA)6th Floor, 38Kor. Moo9 Poochaosamingprai Road, Samrong-Tai, Phrapradaeng, Samutprakan 10130, ThailandTel: 66-2-394-2541

P.T. Pantja Motor (PM)JL. Gaya Motor III No.5, Sunter II, Jakarta 14330, IndonesiaTel: 62-21-6501000

P.T. Mesin Isuzu Indonesia (MII)JL.Kaliabang No.1. Pondok Ungu, Kelurahan Medan Satria, Kec. Bekasi Barat, Bekasi, West Java, IndonesiaTel: 62-21-8879994

P. T. Asian Isuzu Casting Center (AICC)JL. TOL Jakarta-Cikampek km47, Kawasan Kiic Lot 6-9, Karawang, IndonesiaTel: 62-21-8904590

Malaysian Truck & Bus Sdn. Bhd. (MTB)Kawasan Perindustrian, Peramu Jaya, P.O.BOX 6, 26607 Pekan, Pahang Darul Makmur, MalaysiaTel: 60-9-426-0340

Isuzu Malaysia Sendirian Berhad501D, Level 5, Tower D, Uptown 5, No. 5, Jalan SS21/39, Damansara Uptown, 47400 Petaling Jaya, Selangor Darul Ehsan, MalaysiaTel: 60-3-7723-9777

Europe

Anadolu Isuzu Otomotiv Sanayi Ve Ticaret A.S. (AIOS)Yedipinarlar Mevkii, Sekerpinar Koyu 41400 Gebze, Kocaeli, TurkeyTel: 90-262-658-8433

Isuzu Motors Europe Ltd. (ISZE)Suite 24, The Courtyards, Croxley Business Park, Hatters Lane, Watford, Hertfordshire WD18 8NS, U.K.Tel: 44-1923-231-580

Isuzu Truck (UK) Ltd.Thundridge Business Park, Thundridge, Nr. Ware, Hertfordshire SG12 OSS, U.K.Tel: 44-1920-463962

Isuzu Motors Germany GmbH (IMG)Weiherfeld 2, D-65462 Ginsheim-Gustavsburg, GermanyTel: 49-6134-558-0

Isuzu Motors Polska Sp. zo.o. (ISPOL)Ul. Towarowa 50, 43-100 Tychy, The Republic of PolandTel: 48-32-219-9600

Isuzu Benelux N.V.Pierstraat 233-2550, Konitch, BelgiumTel: 32-3-450-1761

Isuzu Iberia S.L.Felipe IV, 7, 28014 Madrid, SpainTel: 34-91-532-6179

AfricaGeneral Motors Egypt S.A.E. (GME)Abu-El Feda Building, 3 Abu El Feda Street, Zamalek, Cairo, EgyptTel: 20-2-735-4004/736-2116

North AmericaIsuzu Motors America, Inc. (ISZA)46401 Commerce Center Drive, Plymouth Township, Michigan 48170, U.S.A.Tel: 1-734-455-7595

Isuzu Commercial Truck of America, Inc. (ICTA)13340 183rd Street, Cerritos, California 90702-6007, U.S.A.Tel: 1-562-229-5000

DMAX, Ltd.3100 Dryden Road, Moraine, Ohio 45439, U.S.A.Tel: 1-937-425-9721

OceaniaIsuzu-General Motors Australia Ltd. (IGM)858 Lorimer Street, Port Melbourne, Victoria 3207, AustraliaTel: 61-3-9644-6666

OVERSEAS OFFICESChinaRoom No. 1510, Beijing Fortune Building, No. 5Dong San Huan North Road, Chao Yang District, Beijing, The People's Republic of ChinaTel: 86-10-6590-8957

BelgiumSphere Business Park, Doornveld 1, Bus 3, B-1731 Zellik, BelgiumTel: 32-2-463-0990

Isuzu Motors Limited Annual Report 2005

CORPORATE DIRECTORY

38

CORPORATE AUDITORSStanding Corporate Auditors Michio Kamiya

Koji Yamaguchi

Shigeaki Wakabayashi

Corporate Auditors Yasuharu Nagashima

Susumu Tsuchida

(As of July 2005)

EXECUTIVE OFFICERSSenior Executive Officers Akira Shinohara

Takashi Urata

Shunichi Satomi

Fujio Anzai

Executive Officers Shigeji Nakamori

Yukio Narimatsu

Hakaru Shibata

Kazuharu Shimizu

Tsutomu Yamada

Shinichi Ohoka

Ryozo Tsukioka

Makoto Ushiyama

Yasuaki Shimizu

Takafumi Ozawa

Masaru Odajima

Masanori Katayama

DIRECTORS

President and Representative Director 1 Yoshinori Ida

Executive Vice President and

Representative Director 2 Basil N. Drossos

Executive Vice Presidents 3 Hiroshi Suzuki

4 Shigeki Toma

Directors 5 Susumu Hosoi

6 Hirokichi Nadachi

7 Yoshio Kinouchi

8 Gourou Shintani

9 Eizou Kawasaki

10 Yoshihiro Tadaki

11 Naotoshi Tsutsumi

Isuzu Motors Limited Annual Report 2005

BOARD OF DIRECTORS

13 5

11976810

24

39

Isuzu Motors Limited

Date of EstablishmentApril 9, 1937

Head Office26-1, Minami-oi 6-chome, Shinagawa-ku, Tokyo 140-8722, JapanTel: +81-3-5471-1141Fax: +81-3-5471-1043

Plants and Other FacilitiesTochigi Plant Manufacturing of engines and partsFujisawa Plant Manufacturing of trucks, engines, components and partsIsuzu Engine Manufacturing Hokkaido Corporation Manufacturing of enginesWa.com Hokkaido Co., Ltd. Overall road testing

Transfer AgentUFJ Trust Bank Ltd.10-11, Higashisuna 7-chome, Koto-ku, Tokyo 137-8081, Japan

Common Stock, Preferred Stock and Number of Shareholders

Preferred StockCommon Stock Class I Class III Class IV

Shares authorized: 3,369,000,000 37,500,000 25,000,000 25,000,000Shares issued: 1,073,619,832 37,500,000 25,000,000 25,000,000 No. of shareholders: 56,962 7 1 1

Head Office

Major Shareholders (% of total)Common Stock %

Japan Trustee Services Bank, Ltd. (Trust Account) 13.89

The Master Trust Bank of Japan, Ltd. (Trust Account) 8.90

General Motors Limited 8.39

Trust & Custody Services Bank, Ltd. (Trust Account) 3.61

Bank of New York for GCM Client Accounts (E) ISG 3.15

Mizuho Global, Ltd. 2.97

Nomura Securities Co., Ltd. 2.02

UBS AG London Asia Equities 1.90

The Sumitomo Trust & Banking Co., Ltd. 1.70

The Mitsubishi Trust and Banking Corporation 1.23

Class I Preferred Stock %

Mitsubishi Corporation 31.33

Mizuho Global, Ltd. 29.69

Itochu Corporation 21.93

The Mitsubishi Trust and Banking Corporation 6.00

The Master Trust Bank of Japan, Ltd.

(Administration Trust Account — 79213) 5.15

The Bank of Yokohama, Ltd. 3.16

Trust & Custody Services Bank, Ltd. (Money Trust Tax Account) 2.73

Class III Preferred Stock %

Mizuho Global, Ltd. 100.00

Class IV Preferred Stock %Mizuho Global, Ltd. 100.00

(As of March 31 2005)

Isuzu Motors Limited Annual Report 2005

CORPORATE DATA